PERTH: Oil Search Ltd has flagged lower production this calendar year due to maturing oil fields after delivering 2009 output within its forecast and weaker sales revenue due to lower oil prices.
In its annual production report yesterday, Oil Search said it expects a 10% fall in output this year to reflect natural field decline, which drove a 6% dip in 2009 production.
Oil Search had US$1.255 billion (K3.4 billion) in cash at the end of December and was debt free, leaving it “extremely well placed for this transformational expansion”, managing director Peter Botten said.
Constraints on oil output relating to more limited gas flaring was another factor expected to reduce production this year, although this would be partly offset by maintenance programmes to reduce downtime.
Papua New Guinea’s largest oil and gas producer’s total output for calendar 2009 was 8.1 million barrels of oil equivalent (mmboe), within its guidance range of 8.0-8.3 mmboe and down from 8.6 mmboe in 2008.
“Oil production will be pretty flat for the next few years but when the PNG LNG (liquefied natural gas) project comes on stream in 2014, Oil Search will take off like a rocket,” CMC Markets analyst David Taylor said.
“It’s one for long term investors.”
Oil Search, which has a stake of about 30% stake in the PNG LNG development, said last month the multi-billion dollar project would add more than 19 mmboe to its annual production.
It also said the ExxonMobil-led joint venture remained on track to achieve financial close in the first quarter of this year.
Mr Taylor said Oil Search’s 2009 result was unsurprising given it was impacted by oil price and currency fluctuations.
Full year sales revenue was down 38% at US$475.8 million (K1.3 billion) reflecting lower output and a 35% fall in the average realised oil price during the 12 months.
The average realised oil price in 2008 was US$100.10 (K270.91) per barrel, compared to US$65.39 (K176.97) per barrel last year.
Mr Taylor said Oil Search’s operating costs in PNG were relatively high.
The company said operating costs were expected to rise this year. – AAP