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Oil Search Confirms Revenue Hit From PNG Quake

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Oil Search has confirmed the damage done to its finances by the severe earthquakes in Papua New Guinea in February with an 18% fall in first half revenue.

The quake saw lower output at the company’s PNGLNG project in Papua New Guinea of $US557.8 million in the six months to June from $US676.2 million a year earlier.

Full half year results are out in around a month’s time.

The financial impact was made to look better by the strong rise in world oil and LNG prices in the half year. Had they been around where they were a year ago, the revenue fall would have been much larger than the 11% reported yesterday.

Half-year sales volumes fell 31% to 9.77 million barrels of oil equivalent (mmboe) from the first half of last year.

Total revenue for the quarter fell 11% to $US262.8 million. Total product sales were 9% lower than in the first quarter, due to the rebuilding of inventory and the timing of LNG shipments, with three LNG cargoes on the water at the end of the quarter, directors said.

“While the average realised oil and condensate price was 3% higher than in the first quarter, the second quarter LNG and gas price was 4% lower, due to a higher proportion of LNG cargoes sold on the spot market following the earthquake,’ the company added.

Oil Search's managing director, Peter Botten, said in a statement the company was in discussions over further LNG developments in Papua New Guinea.

The company said production at PNG LNG, was heading towards the upper end of downgraded guidance of 23-26 mmboe for 2018.

Oil Search had revised 2018 unit production costs and production guidance earlier this year after that devastating earthquake, forced ExxonMobil to shut down operations.

Production resumed in the second week of April, a fortnight ahead of schedule and is now building.

The recovery can be seen in second quarter production of 5.40 million barrels of oil equivalent (mmboe), up 12% from the first quarter, reflecting the recommencement of production following the quake.

"Since coming back fully online in late April, the PNG LNG Project has performed strongly, achieving an annualised production rate of 8.5 MTPA over May and June, compared to 8.3 MTPA for the 2017 full year,” Oil Search said yesterday.

"Production rates have benefited from planned modifications to the Hides Gas Conditioning Plant and maintenance of the LNG trains in Port Moresby, undertaken while PNG LNG operations were shut down following the earthquake, as well as high levels of reliability.

But while the Kutubu and Gobe fields came back on-stream during the quarter, the Agogo Production Facility, Agogo and Moran fields, which were closest to the earthquake’s epicentre, remained offline.

"The fields are expected back onstream shortly, with a progressive ramp-up over the second half of 2018. Based on current estimates, with production heading towards the 26 mmboe production guidance range. The shares fell 2.7% to $8.80 yesterday.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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