PERTH (miningweekly.com) – Oil and gas producer Oil Search has reported a strong quarter in the three months to September, as operating revenues and production rose.
Operating revenues for the September quarter were up 12% on the previous quarter, to $409-million, as liquefied natural gas (LNG) and gas realised prices increased by 16% in the same period.
Production for the September quarter was also up by 5% on the previous quarter, to 6.9-million barrels of oil equivalent.
Acting CEO Peter Fredricson told shareholders that the results demonstrated the resilience of operations and sustained commitment to the safety of Oil Search’s staff, and maintaining safe and reliable production.
With the strong quarter, the ASX-listed company has narrowed its full year production guidance from the previous estimate of between 25.5-million and 28.5-million barrels of oil, to between 26-million and 28-million barrels of oil equivalent.
“Our outlook for the 2021 full year remains positive as we tighten our production guidance and maintain our operating cost guidance despite the additional costs associated with the management of the impact of Covid-19.
“Both LNG and oil markets remain strong, with spot LNG markets continuing to exhibit high volatility and record highs which is a supportive environment for market soundings in respect of new medium- and longer-term LNG sales contracts,” said Fredricson.
Looking at the quarter under review for Oil Search, Fredricson noted that earlier in the year, the Papua New Guinea (PNG) LNG project participants approved the full funding of the Angore project which, along with the associated gas fields, forms an important part of the gas sequence and underpins maintaining plant capacity beyond 2030.
“We have made good progress across our growth projects with the ramping up of activity in the Papua LNG project, as it prepares to enter pre-front-end engineering design (FEED) before the end of 2021 ahead of a joint venture decision to enter FEED in 2022.
“We are also pleased to be another step closer to the development of the P’nyang gas resource with the recent singing of the heads of agreement between ExxonMobil and the PNG government outlining the framework for negotiating a fully termed gas agreement before the end of 2021.
“The P’nyang project represents a valuable back-fill opportunity within the PNG LNG gas sequence and another opportunity for Oil Search to be involved in a key project that will support the PNG economy and its people.”
Fredricson noted that in Alaska, the Pikka Phase 1 project had progressed technical work towards final investment decision (FID).
“As previously communicated, Oil Search and its co-venture partner are focused on ensuring the appropriate pre-conditions, including funding, are met prior to taking FID targeted in the first half of 2022, with resulting first oil planned for 2025.
“While the absolute focus of our workforce remains on safely delivering our strategic objectives, important steps were also taken during the quarter to advance the opportunity presented by the proposed merger with Santos.
“The potential benefits of a combined entity remain clear, with the merged entity expected to sit amongst the world’s 20 largest global oil and gas companies, bringing greater access to capital markets to enable funding for new and existing opportunities. Importantly, the merger is also expected to create greater alignment across the LNG growth projects in PNG, which continue to support jobs, development and investment in PNG.”
The two companies in August announced a merger agreement to create a A$21-billion oil and gas giant. Under the terms of the agreement, Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held via a scheme of arrangement.
Following approval of the scheme, Oil Search shareholders will own approximately 38.5% of the merged group and Santos shareholders will own approximately 61.5%.