Oil Search lifts guidance after stellar Q2

THE PNG LNG project has gifted Oil Search its highest quarterly production in the company's history for Q2, prompting it to upgrade its 2015 production forecast range.
Oil Search lifts guidance after stellar Q2 Oil Search lifts guidance after stellar Q2 Oil Search lifts guidance after stellar Q2 Oil Search lifts guidance after stellar Q2 Oil Search lifts guidance after stellar Q2

Oil Search announced this morning that its total production for Q2 was 7.41 million barrels of oil equivalent, 7% higher than Q1, with the ExxonMobil-operated PNG LNG contributing 5.67MMboe (24.7 billion cubic feet of LNG and 830,000bbl liquids).

Production from the base PNG oil and gas business was 1.74MMboe.

Oil Search reaped $US391.5 million in total revenue for Q2, compared to $472.3 million in Q1, dampened by the average realised LNG and gas price being $8.10/million British thermal units, which was 35% lower than Q1.

The average realised oil and condensate price, meanwhile, was $61.60/bbl, 20.3% higher than Q1, which brought Oil Search's total revenue for the first half of 2015 to $863.8 million, down from $10 million in H1 2014.

Oil Search managing director Peter Botten said the company achieving its highest quarterly production reflected not only further production increases from PNG LNG but a "solid performance" from its operated oil fields.

"Based on the PNG LNG plant's performance to date, we are confident the project can continue to produce LNG above the nameplate capacity of 6.9MMtpa in 2015," Botten said.

"The PNG LNG project's contract customers continued to take their full contractual volumes and the project was successful in selling all its additional spot cargoes during the period."

Oil Search expects its production costs to be in the range of $8-10/boe, below the full-year guidance, due to the deferral of some work programs into the second half of the year.

Oil Search also cited savings from renegotiated supply contracts, lower costs for labour, transportation and chemicals and favourable exchange rate movements, along with the impact of higher than budgeted production.

The company does not expect any impairment charges in H1 2015.

Botten also reported that "good progress" was made on gas commercialisation activities, both in the North-West Highlands and in PNG's Gulf Province.

PNG Prime Minister Peter O'Neill had expressed his strong support for the proposed Papua LNG project, saying the government was ready to move ahead with preparatory work, including ensuring regulatory requirements are met and processed and environmental studies are undertaken.

"The JV is engaging with key stakeholders - including state, provincial and local governments as well as local communities, to ensure that final investment decision can be achieved in the earliest practicable timeframe," Botten said.

"Although early in the appraisal and testing program, encouraging results were seen from the Antelope 5 well, underscoring growing confidence about the resource base for the project."

Preparations to sidetrack the Antelope 4 appraisal well progressed during the quarter, with drilling expected to start next month.