Oil Search is re-assessing its 2016 work programs and is looking for opportunities to optimise its activities, improve efficiency and further reduce its costs.
The company stated in its fourth quarter report that they are still generating positive cash flow even at the current depressed oil price.
Given that PNG LNG Project expansion and the Papua LNG Project are considered to be among the most commercially attractive new LNG projects globally, activities to progress these potential developments will continue to be prioritised.
Guidance on 2016 operating costs and capital expenditure will be provided in the 2015 full year results, scheduled to be announced on Few 23, 2016.
Managing Director Peter Botten said despite the present oil price weakness, the PNG LNG Project co-venturers remain committed to pursuing PNG LNG Project expansion activities, as maximising production through the existing trains and the construction of a potential third train continues to offer attractive returns.
He said material progress is also being made on the Papua LNG Project, which is regarded by the participants and a range of independent experts as one of the most competitive greenfield LNG projects in the world.
“Oil Search is in the very fortunate position of having a range of producing assets with low operating costs and small sustaining capital requirements.
“Based on the current cost structure, the Company would generate positive operating cash flow even if oil prices fell to US$20/barrel.”
Botten added that a number of changes were made to the Company’s organisational structure, offices and internal processes in 2015, to improve efficiencies and reduce costs.
“In addition, almost all third party contracts have already been renegotiated or are being reviewed, in line with reduced forward work programmes and current market conditions.
“Given the recent further sharp decline in oil prices, we are using the information gained through the 2015 Business Optimisation Programme to actively prioritise further cost reduction opportunities across our business.
“Our overall strategy, however, remains unchanged, with a strong focus on PNG, where we have a major competitive advantage, and on our high-value growth projects.”