Lower oil prices hamper Oil Search Q2 revenue

  • Jul 21, 2020
  • BLNG

The Papua New Guinea-focused oil and gas producer and PNG LNG stakeholder, Oil Search reported a drop in revenue due to lower oil prices.

The company saw its total revenue for the second quarter of the year tick down 26 per cent. Quarterly revenue reached $266.2 million, which compares to $359.4 million in the previous quarter.

For the first half of the year, Oil Search reported revenue of $625.6 million, 19 per cent down from $777 million reported in the corresponding period in 2019.

Oil Search attributed the drop in revenue to fall in oil prices and a higher proportion of LNG sold on the spot market.

Total production for the second quarter of 2020 was 7.29 million barrels of oil equivalent (mmboe).

This included 6.40 mmboe from the PNG LNG project, which produced at an annualised rate of 8.8 mtpa during the period, and 0.89 mmboe from Oil Search-operated assets.

The plant benefited from a full quarter of uptime, following the deferral of maintenance at both the Hides gas conditioning plant and the LNG trains in Port Moresby, previously scheduled to take place in May 2020, to 2021.

The PNG LNG joint venture supplied 173 mmscf of gas to the 58-megawatt Port Moresby gas-fired power station, operated by NiuPower, 43 per cent higher than the first quarter.

A 14 per cent increase in oil production was offset by a lower contribution from the Hides gas-to-electricity (GTE) project, due to the suspension of production in late April 2020 following the cessation of mining and minerals processing at the Porgera gold mine.

Total production for the first half of 2020, net to Oil Search, was 14.66 mmboe, up 4 per cent on the same period in 2019.

Commenting on the results, Oil Search managing director Keiran Wulff said the company is on track to achieve its production targets in 2020.

Total hydrocarbon sales for the quarter were 6.79 mmboe, similar to sales in the first quarter of 2020.

Oil Search had four LNG cargoes on the water at the end of the period, worth approximately $30 million in revenue. This compares to two cargoes on the water at the end of the first quarter.

During the quarter 27 LNG cargoes were delivered to offtakers, the same as in the first quarter, comprising 21 cargoes sold under contract, including five under mid-term sale and purchase agreements and six on the spot market.

Four Delivered ex Ship (DES) cargoes were on the water at the end of the period, compared to two DES cargoes on the water at the end of the first quarter.

This, together with higher tank storage reflecting the timing of shipments, resulted in a material build in LNG inventory at the end of the quarter.

Three naphtha cargoes were delivered during the quarter, compared to two in the prior quarter. Three full and one partial Kutubu Blend cargoes were sold during the quarter, unchanged from the prior period, Oil Search said.

Total sales for the first six months of the year edged up 2 per cent from 13.39 million in 2019 to $13.66 million in 2020.

The average oil and condensate price realised during the second quarter was $23.05 per barrel, down 53 per cent on the prior quarter.

The average realised LNG and gas price fell 19 per cent to $7.34 per million British thermal units (mmBtu), supported by the two-to-three month lag between oil prices flowing through to LNG contract prices.