OSH Oil Search Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--Oil Search Ltd. (OSH.AU) logged a sharp contraction in quarterly revenue as the oil and gas producer was squeezed by lower prices and the timing of cargo shipments.

Still, Oil Search said output from its flagship PNG LNG gas-export operation in Papua New Guinea remained well above the installed capacity, while drilling on acreage in Alaska had confirmed the presence of oil and supported expectations the resource estimate there would be increased.

Sales revenue for the first quarter totaled US$398.1 million, a drop of 21% on the prior quarter as sales were held back by the timing of liquid natural gas shipments, with three cargoes on the water during the period compared with just one in the previous three months. Revenue was also hit by a 3% fall in the oil and condensate price received by the company and a 7% fall in LNG and gas prices.

Oil Search operates all of Papua New Guinea's producing oil fields, though these are dwarfed by output from the Exxon Mobil Corp. (XOM) led US$19 billion PNG LNG operation, in which Oil Search has a 29% interest. The liquefied natural gas plant returned to full operation a year ago after oil and gas output in Papua New Guinea was disrupted by a violent earthquake and series of aftershocks in early 2018.

The company, based in the Papua New Guinea capital of Port Moresby and listed in Australia, said its production in the first quarter was down 2.6% quarter-over-quarter at 7.25 million barrels of oil equivalent, dented by lower oil-field output. The PNG LNG project produced at an annualized rate of 8.8 million tons for the period, almost 30% above the "nameplate" capacity and 6% ahead of annual output before the earthquake.

Oil Search, which is looking to roughly double production by 2025, is targeting output between 28 million and 31.5 million barrels equivalent in 2019 after a drop to 25.2 million last year after the 7.5 magnitude earthquake struck Papua New Guinea's Highlands in February 2018, forcing the closure of all oil and gas fields in the region and suspension of the PNG LNG gas-export operation.

With partners Exxon and Total SA (TOT), Oil Search earlier this month signed a deal with Papua New Guinea's government that paves the way to a final investment decision on the expansion of LNG output in the country. The deal defined the fiscal framework for the Total-led Papua LNG project, allowing it to push ahead with early engineering and design work for facilities that will share some infrastructure with Exxon's PNG LNG operation. Together, the companies have plans for three additional LNG production lines with a collective capacity of about 8 million tons.

The company said an inaugural drilling campaign in Alaska has encountered oil in all four wells, and initial analysis of the data supported its view of a likely material upgrade of the resources that would underpin development plans. Oil Search entered Alaska, buying into promising acreage on the North Slope in late 2017, in a move to reduce its reliance on Papua New Guinea and LNG.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

April 15, 2019 20:30 ET (00:30 GMT)

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