As to be expected, the lower prices for oil and gas adversely impacted Oil Search’s (OSH) quarterly revenue, despite record production, including the PNG LNG project.
The company told the ASX yesterday its first-quarter sales fell 34% to $US313.1 million ($404 million) from the first quarter of 2015 and were down 9% on the three months to December.
The average realised price for oil and condensates fell 32% compared with the March 2015 quarter, while the average LNG price was down 45% at just $US6.84 per million British thermal units.
Production rose 3% from the December quarter to 7.72 million barrels of oil equivalent, the fourth straight quarter of production growth. Oil Search’s share of output from the ExxonMobil-operated PNG LNG venture reached 5.94 million barrels of oil equivalent.
Managing director Peter Botten said in the statement PNG LNG “achieved its highest quarterly production since coming onstream”, producing at an annualised rate of 8 million tonnes a year.
He said production had been increased beyond the rated capacity of the project “at almost no additional capital cost” and as a result the developers are looking at further opportunities to raise production.
Production from PNG LNG will however be lower this quarter after a short partial shutdown for “routine maintenance” this month.
Mr Botten said the impact of the shutdown has already been taken into account in the production guidance for PNG LNG for the full year, which is unchanged at between 7.5 million and 7.9 million tonnes.
Mr Botten says PNG LNG is looking at closer co-operation with Oil Search’s other PNG LNG project, the proposed Papua LNG project operated by French oil major Total SA.
"Given the current environment of low oil and gas prices, Oil Search believes that cooperation between, and possibly an integration of, these two potential developments, is essential to maximise value and avoid high-cost infrastructure duplication in PNG," Mr Botten said.
He said studies had pointed to a wide range of development activities that, if coordinated, could "generate material value" from lower costs and operating synergies.
Mr Botten said that the PNG government will have stakes in both projects and would “benefit significantly” from the two projects working together. He said yesterday there was already enough gas to underpin two new 4 million tonnes a year LNG trains, with the option of a third depending on further drilling work.
“Based on soundings with financial institutions and our recent experience in refinancing our corporate facilities, significant debt funding appears to be available for good quality projects such as these potential developments, despite the weaker oil price environment," Mr Botten said.
Oil Search shares rose 5% to $6.53.
