Oil Search revenue drops in Q3

  • Oct 22, 2020
  • The National

Highlights of Oil Search third quarter report released this week include:

2020 3rd quarter summary

Production: Total production for the third quarter of 2020 increased slightly to 7.30 million barrels of oil equivalent (mmboe).

This included 6.55 mmboe from the PNG LNG Project, which produced at an annualised rate of 8.9 MTPA during the quarter, and 0.75 mmboe from Oil Search-operated assets.

Oil production declined seven per cent to 0.68 mmbbls, while production from the Hides Gas-to-Electricity (GTE) project remained suspended, following the cessation of mining and minerals processing at the Porgera gold mine in April.

Total production for the first three quarters of 2020, net to Oil Search, was 21.96 mmboe, up five per cent on the same period in 2019.

Sales: Total hydrocarbon sales for the quarter were 7.55 mmboe, 11 per cent higher than the second quarter of 2020.

Total revenue generated from hydrocarbons declined 29 per cent to US$189 million.

The lower revenue was due to a large reduction in the average realised LNG and gas price, impacted by the two-to-three month oil price lag on LNG contract prices, a higher proportion of LNG sold on the spot market and a US$14 million (K48.23mil) negative revenue adjustment relating to the final price determinations for seven delivered ex ship (DES) cargoes delivered during the second quarter, with pricing finalised during the third quarter.

Other revenue, comprising rig lease income, infrastructure tariffs, electricity, refinery and naphtha sales, fell 32 per cent to US$5.6 million (K19.29mil).

Pricing: The average oil and condensate price realised during the third quarter was US$36.52 per barrel, up 58 per cent on the prior quarter.

The average realised LNG and gas price fell 42 per cent to US$4.23 per million British thermal units (mmBtu), due to the two-to-three month oil price lag, capturing the oil price weakness in April and May 2020 flowing through to LNG contract prices and an increased portion of spot market sales volumes at historically low North Asian prices.

Liquidity: At Sept 30, Oil Search had liquidity of US$1.65 billion (K5.68bil), comprising US$752.7 million (K2,593.26mil) in cash and US$895.6 million (K3,085.59mil) in undrawn credit facilities.

During the quarter, the company repaid US$60 million (K206.72mil) under its revolving credit facilities.

LNG expansion: Discussions continued between the PRL 3 (P’nyang) operator ExxonMobil and the PNG Government with the objective of securing fair and balanced fiscal terms on the P’nyang Gas Agreement.

Internal analysis carried out by Oil Search during the quarter, utilising independent data and discussions with potential customers, assessed the impact of the Covid-19 on future LNG demand, resulting in a view that the supply gap anticipated for the mid-2020s has been deferred by a few years.

Coronavirus update: Oil Search established a business continuity team in August, focusing on supporting the existing initiatives to mitigate key risks to personnel and maintaining operating performance through an extended period of Covid-19 related restrictions, as well as ensuring the company continues to pursue all avenues to protect the continuity of operations.

This included, in consultation with medical teams, investigating enhanced Covid-19 testing protocols to enable quarantine periods to be reduced.

The PNG field workforce remains in strict quarantine zones in order to reduce any risk to Oil Search and PNG LNG’s operations.

In addition to the Covid-19 transmission prevention practices and procedures established during the initial response phase, Oil Search Alaskan operations have implemented a weekly Covid-19 testing protocol and mandated a negative Covid-19 test prior to personnel being approved for travel to the North Slope.

These additional measures minimised the potential spread of the Covid-19 and maintained the health, safety and wellbeing of the workforce during our summer works campaign on the North Slope.