Oil Search Shares Tumble After Releasing September Quarter Report

  • Oct 23, 2018 AEDT
  • Team Kalkine
Oil Search Shares Tumble After Releasing September Quarter Report

On 23 October 2018, Oil Search Ltd (ASX: OSH) released its September quarter report in which the company reported that it experienced strong start to second half, due to the recovery in production and higher global oil and gas prices.  Despite this news, the share price of the company decreased by 3.467 percent as on 23 October 2018.

In the third quarter of CY 2018, the total production of the company was 7.5 million barrels of oil equivalent (mmboe) which is 39 percent higher than the second quarter of 2018. The production level is close to the pre-earthquake level of 7.6 mmboe produced in the third quarter of 2017.

The PNG LNG Project of the company attained annualized production rates of 8.9 MTPA for the quarter, 9.0 MTPA for September month and a daily rate of 9.2 MTPA, the highest rates since the Project came onstream in 2014. Based on the strong performance by the PNG LNG Project, it is now expected that 2018 full year production will be in between 25 - 26 mmboe (previously 24 – 26 mmboe) while guidance for full-year unit operating costs has been narrowed, to US$11.50 – 12.50 per boe, from US$11 – 13 per boe previously. 

During the quarter, the total revenue of the company increased by 81 percent to US$474.9 million, the highest quarterly revenue achieved since the fourth quarter of 2014. The revenues were supported by a 68 percent lift in LNG and gas sales and a 31% rise in liquids sales, combined with higher realized LNG and gas prices (up 18%) and oil and condensate prices (up 5%). During the quarter, the company progressed with the activities related to the development of additional LNG capacity in PNG.

Barikewa 3 appraisal well which is in the Forelands region of PNG, successfully intersected gas and confirmed good reservoir quality in the target intervals. Kimu 2 appraisal well also reported positive results, which proved up an extension of the Kimu gas reservoir in May. Evaluation of the data from both wells will help in outlining the resource base of these fields and it will also delineate an optimal route for potential commercialization.

The company is continuing with the preparations for the 2018/19 drilling programme in Alaska which is comprised of two appraisal wells in the Pikka Unit. These wells are expected to confirm the continuity and establish the deliverability, of the reservoir and if successful, could add approximately 250 million barrels to Oil Search’s current 2C resource estimate of 500 million barrels.

At the end of the third quarter, the Company was having liquidity of US$1.44 billion (compared to US$1.26 billion at the end of June), which reflects strong operating cash flows, underpinned by the recovery in production post the earthquake and higher realized oil and gas prices.

In the last three months, the share price of the company decreased by 2.18 percent as on 22 October 2018. OSH’s shares traded at $8.215 with a market capitalization of circa $12.97 billion as on 23 October 2018 (AEST 2:14 PM).

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