PERTH (miningweekly.com) – Despite reporting strong production in the December quarter, ASX-listed Oil Search reported a 10% decline in revenue for the fourth quarter, on the back of lower oil prices.

Total production during the quarter under review reached 7.51-million barrels of oil equivalent, which was up 1% on the 7.42-million barrels produced in the previous quarter.

The Papua New Guinea liquefied natural gas (PNG LNG) project delivered 5.73-million barrels of oil equivalent, while the base LNG oil and gas business contributed 1.79-million barrels of oil equivalent.

“Following a strong performance from both the PNG LNG project and our operated oil fields during the fourth quarter, 2015 full-year production was 29.3-million barrels of oil equivalent, which was an all-time record for the company and above the top-end of our 27-million to 29-million barrels equivalent guidance range,” said Oil Search MD Peter Botten.

The PNG LNG project produced at a yearly rate of 7.6-million tonnes a year, up from the 7.4-million tonnes in the third quarter, and some 10% higher than the nameplate capacity of 6.9-million tonnes.

Despite the increase in production, total revenue for the fourth quarter reached $342.9-million, which was 10% lower than the third quarter, largely owing to the drop in global oil and gas prices.

Product sales for the fourth quarter were also 3% lower than the September quarter, owing to timings of liftings.

“Oil Search is in the very fortunate position of having a range of producing assets with low operating costs and small sustaining capital requirements. Based on the current cost structure, the company would generate positive operating cash flow even if oil prices fell to $20/barrel,” Botten added.

He pointed out that a number of changes had been made to the company’s organisational structure and internal processes in 2015, to improve efficiencies and reduce costs.

Further, almost all third-party contracts have been renegotiated or were being reviewed, in line with reduced forward work programmes and current market conditions.

“Given the recent further sharp decline in oil prices, we are using the information gained through the 2015 business optimisation programme to actively prioritise further cost reduction opportunities across our business. Our overall strategy, however, remains unchanged, with a strong focus on Papua New Guinea, where we have a major competitive advantage, and our high-value growth projects,” Botten said.

Given the downturn in oil prices in recent months, the company was also carrying out a review of impairment across all of its assets.