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Oil Search Limited (ASX:OSH) has presented its 2018 Reserve and Resources Statement, in which the company has mentioned that its total 2P (Proved and probable) oil reserve and 2C (Contingent) oil resources rose 102% to 253.5 million barrels (mmbbl) and total 2P and 2C gas reserves increased by 6% to 6,742.2 billion cubic feet (bcf).
As on December 31st, 2018 the company's proved (1P) oil and condensate reserves were 54.1MMbl and gas reserves (1P) were 1,937.1 bcf. Proved and Probable (2P) reserves were 68.0 mmbbl of oil and condensate and 2,209.3 bcf of gas.
The increase in Reserves was marked by the booking of 127.5mmbl 2C oil resources at the Pikka Unit for the first time and completion of the company's acquisition of assets in the Alaska North Slope in February 2018, in which the company acquired a 25.5% share of the estimated gross resources for the unit of 500 mmbbl in the Pikka unit.
The mapping of the Nanushuk and satellite reservoirs in the Pikka unit, based on an extensive grid of 3D seismic data and 19 well penetrations along with other data allowed the company to position the Pikka unit as a potential source of contingent resources.
Additional 319.8 bcf of 2C gas and 5.2 mmbbl of 2C came from P'nyang field in the PNG Highlands following the successful P'nyang South 2 ST1 appraisal well. The P'nyang resources are considered to remain contingent on account of various factors such as additional technical studies required to classify it as a 2P resource, confirmation of a commercially viable development project, acceptable project financing and the negotiation and commitment to the future gas sales contract.
Kimu Field, following the successful Kimu 2 appraisal well, also marked an increase of 186.7 bcf in contingent gas and was classified as contingent on account of various factors such as the requirement of additional technical studies, a commercially viable development project, and future gas sales contracts.
Barikewa 3 well drilled in 2018 successfully intersected hydrocarbons in line with company's expectations and further technical studies on Barikewa will be carried out through 2019 to review the size of the resource and to determine the optimal commercialisation options for the gas field.
FY18 business update:
The first half of the financial year 2018 was dominated by Highlands earthquake in February and respective activities to restore the operations of the company. However, the second half noticed a strong recovery and PNG LNG achieved half year production rate of 8.8MTPA. 2P and 2C liquids reserves and resources increased to 253.5mmbbl, with gas up 6% to tcf.
Despite 17% lower production, the net profit after tax of the company increased by 13% to US$ 341 million and company distributed a final dividend of 8.5 US cents taking a full year dividend to 10.5 US cents, which in turn marked a 47% pay-out ratio.
The Revenue increased by 6% on higher realised prices but a decline in production by 17% was reported due to the earthquake offset the rise.
The company maintained a positive cash flow with investing cash outflow of US$ 415.4 million for Alaska North Slope acquisition and US$ 331.9 million of PNG LNG project finance debt repaid over 2018.
FY19 Guidance:
The company stated production guidance from PNG LNG project to be in a range of 24.0-26.0 mmboe and a total production of 28.0â31.5 mmboe.
The Capital costs for exploration and evaluation are expected to be in a range of US$ 235-285 million and the total capital cost to be in the range of US$545â655 million. The production cost guidance is in the range of US$ 9-10/boe.
On February 7th, the company announced its drilling report as well. However, despite decent drilling results, the share price traded lower, but the stock soon picked up from its lower level on 11th February and currently trading around AU$ 8.040 as on 19th February, down by 1.471% from its previous close.
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