Oil Search to sustain oil output level
By BRIAN GOMEZ in Sydney
OIL Search has expressed confidence it will maintain the country’s oil production at 40,000 to 50,000 barrels a day for an additional two-year period to 2011 in a bullish presentation to Australia’s oil and gas analysts.
Presenting its strategy for the next five years, top company executives said the current emphasis was on implementation of the ExxonMobil-led liquefied natural gas (LNG) project at an anticipated cost of US$10-11 billion (K29-32 billion) with exports commencing in late 2013.
In the past five years, the company’s market capitalisation grew from A$800 million (K2.2 billion) to A$5 billion (K14 billion), making it the fifth best performer on the Australian Stock Exchange in terms of total shareholder returns.
This was assessed at a compound rate of 53% a year.
Oil Search managing director Peter Botten said the company’s strategic review showed the LNG project on its own would deliver more than 15% annual growth in shareholder returns in the next five years with “upside exposure to higher commodity prices”.
Additional significant value could be derived from uptapped gas resources – 40% of Oil Search gas totalling two trillion cubic feet has yet to be committed - over the next four years, he said.
Executive general manager – gas Bob Marcellus said the company wanted to drive a second phase of gas development in Papua New Guinea based on increased LNG capacity - the option with the best returns – as well as petrochemical supply, fertilizers and other gas opportunities.
He said the infrastructure spine to be developed for PNG would lead to “multi in-country developments”.
To conserve cash for the ExxonMobil-led LNG venture and in view of recent exploration disappointments, Oil Search also planned to rationalise its recent Middle East and North African (MENA) exploration and production assets.
More than 40 companies have already expressed interest in the MENA assets where Oil Search intends to retain a role as an operator in some areas to leverage on relationships that have been developed while farming out some assets.
Executive general manager – business development Keiran Wulff said the divestment portfolio is likely to include exploration and production assets in Yemen and Egypt and the farming down of 100% owned frontier acreage in Tunisia, where prospectivity for gas is high.
The UK-based Harrison Love Grove & Associates has been appointed advisers with the MENA transaction expected to conclude by the middle of this year. Substantial proceeds, likely to be several hundred million US dollars, will supplement current cash reserves of US$415 million (K1.2 billion) for the anticipated Oil Search share of US$2.9 billion (K8.4 million) for the LNG project.
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