OIL Search says the company will be reducing its investment expenditure for this year by about US$300 million (K1 billion).
This reduction was made in response to the oil price fall in March in which Oil Search undertook a comprehensive review of its planned activities over the balance of 2020.
The company in its first quarter result of 2020 said forecast capital expenditure going forward from this month (April 2020) was expected to be in the range of US$200 million (K674.3 million) – US$300 million (K1 billion) to be spent on areas including the following:
- Completion of abandonment of the Gobe footwall well, finalisation of deep water seismic acquisition and partial completion of seismic acquisition in the Highlands prior to demobilising crews;
- Continuing to progress negotiations on P’nyang gas agreement and maintain LNG expansion licence commitments; and,
- Maintaining other licence commitments in PNG and Alaska.
Meanwhile, Oil Search noted that the average oil and condensate price realised during the quarter was US$49.51 (K166.9) per barrel, 20 per cent lower than in the previous quarter, reflecting the steep decline in global oil prices from early March.
The average price realised for LNG and gas sales decreased four per cent to US$9.08 (K30.6) per mmBtu (one million British Thermal Units), significantly less than drop in oil prices due to the two-to-three month lag between spot oil price and LNG contract prices.
A BTU (British terminal unit) is a measure of the energy content in fuel, and is used in the power, steam generation, heating and air conditioning industries.
One BTU is equivalent to 1.06 joules.
Due to fall in oil price, the company announced that final investment decision (FID) on Pikka Unit Development on Alaska North Slope, previously expected in the second half of this year, had been deferred.
Work would continue on optimising development and incorporating results of recent successful drilling.
Progression to FID on Pikka Unit Development would be dependent on an improvement in market conditions.
While formal marketing activities relating to planned sell-down of a 15 per cent interest in the project have been suspended, the company is continuing discussions with parties that expressed interest prior to oil price fall.