OSL records over K1 billion Q3 Revenue

Oil Search Limited has recorded its strongest quarter since the fourth quarter of 2014 delivering its highest quarterly revenue of $474.9 million (K1.5 billion)

Managing Director, Peter Botten, announced this in the company’s third quarter report for 2018.

The record is a result of increased production; higher LNG, gas and liquids sales and higher realized LNG and gas prices

Highlights from the quarter covering production and sales include:

  • Total production in the third quarter of 2018 was 7.5 million barrels of oil equivalent (mmboe), 39% higher than in the second quarter and close to the pre-earthquake level of 7.6 mmboe produced in the fourth quarter of 2017. The PNG LNG Project achieved annualised production rates of 8.9 MTPA for the quarter, 9.0 MTPA for September and a daily rate of 9.2 MTPA, the highest rates since the Project came onstream in 2014. Oil Search-operated production continued to improve and is expected to be progressively restored over the coming months.
  • Based on the strong performance by the PNG LNG Project since the recommencement of production post the earthquake, 2018 full year production is now expected to be between 25 - 26 mmboe (previously 24 – 26 mmboe) while guidance for full year unit operating costs has been narrowed, to US$11.50 – 12.50 per boe, from US$11 – 13 per boe previously.
  • Total revenue rose by 81% to US$474.9 million, the highest quarterly revenue achieved since the fourth quarter of 2014. This was underpinned by a 68% lift in LNG and gas sales and a 31% increase in liquids sales, combined with higher realised LNG and gas prices (up 18%) and oil and condensate prices (up 5%).

Oil Search Managing Director, Peter Botten, said Production increased 69% during the quarter, largely reflecting the resumption of production from the Moran and Agogo fields and a full quarter of contribution from the other fields.

Production from OSL’s oil and gas fields is expected to ramp up as remedial work continues and flow lines in remote locations, damaged by the earthquake, are restored.

The PNG LNG Project achieved record production levels following modifications undertaken on the Hides Gas Conditioning Plant and maintenance work on the LNG trains in March while production was shut-in due to the earthquake.

Botten said current production is approximately 30% above nameplate capacity and has been achieved with little additional expenditure, delivering significant incremental value to all Project stakeholders. These production levels are underpinned by the Project’s strong reserve position, which was upgraded materially following recertification of the PNG LNG fields in 2016.

During the quarter, the Company benefited from higher global oil and gas prices, achieving an average realised oil and condensate price of US$76.17 (K241.12) per barrel, up 5% on the second quarter, and an average realised LNG and gas price of US$10.45/mmBtu, 18% higher than in the previous period.

This, together with a rebound in production and sales volumes, drove an 81% increase in total revenue to US$474.9 million. Strong operating cash flows resulted in an improvement in our liquidity position, from US$1.26 billion at mid-year to US$1.44 billion at the end of September, confirming the Company’s sound financial position.

Other highlights include:

  • Mid-term LNG sales and purchase agreements (SPAs) were signed by the PNG LNG Project with PetroChina and BP, increasing total contracted volumes from the PNG LNG Project to 7.5 MTPA. Negotiations continue to contract the final mid-term tranche of 0.45 MTPA.
  • During the quarter, activities related to the development of additional LNG capacity in PNG advanced. Discussions took place between the PNG LNG Project, P’nyang (PRL 3) and Papua LNG (PRL 15) joint ventures to mature technical definition for the developments, project financing and the remaining agreements required to enable integration of the projects. Gas agreement discussions between the PRL 3 and PRL 15 joint ventures and the PNG Government also progressed, with the aim of agreeing key terms by the APEC Economic Leaders’ Meeting in November.
  • In the Forelands region of PNG, the Barikewa 3 appraisal well successfully intersected gas, confirming good reservoir quality in the target intervals. This followed positive results from the Kimu 2 appraisal well, which proved up an extension of the Kimu gas reservoir in May. Evaluation of the data from both wells will assist in delineating the resource base of these fields and the optimal route for potential commercialisation.
  • In the PNG Highlands, construction of the Muruk 2 appraisal well pad was completed, with rig mobilisation underway in preparation to commence drilling in November 2018.
  • In the onshore Gulf, Oil Search completed its farm-in to four highly prospective licences adjacent to the Elk-Antelope fields in PRL 15, enhancing its exploration acreage and joint venture alignment in this important gas hub. A 330 kilometre seismic acquisition programme over these licences and in PRL 15 will be followed by the acquisition of an additional 250 kilometres of seismic, to help mature identified leads and prospects for potential future drilling.
  • In Alaska, preparations for the 2018/19 drilling programme, comprising two appraisal wells in the Pikka Unit, continued. These wells are expected to confirm the continuity, and establish the deliverability, of the reservoir and if successful, could add approximately 250 million barrels to Oil Search’s current 2C resource estimate of 500 million barrels. Work also continued on how to optimise the value of the Company’s fixed price option to buy the balance of Armstrong’s interests in the key Alaskan assets.
  • The Company ended the third quarter with liquidity of US$1.44 billion (compared to US$1.26 billion at the end of June), reflecting strong operating cash flows, underpinned by the recovery in production post the earthquake and higher realised oil and gas prices.
Cedric Patjole