Oil Search Cuts Costs to Position Itself for Growth from 2025

Tuesday, August 25, 2020

Oil Search Ltd aims to start producing oil in Alaska in 2025 and expand Papua New Guinea (PNG) gas exports from 2027, after slashing costs to weather weaker oil prices in the wake of the coronavirus outbreak, its chief executive said on Tuesday.

The Australian-listed company reported an 85% plunge in half-year core profit on Tuesday and scrapped its dividend, hurt by the COVID-19 driven slump in oil prices.

After axing a third of its workforce and raising cash earlier this year, the company is now focused on cutting the break-even cost to well below $40 a barrel at its Alaskan Pikka oil project, where the company has found more oil with recent drilling.

"The last six months have been a catalyst for absolutely looking at every part of our business to be able to position us and grow our company at much lower oil prices," Keiran Wulff told Reuters in an interview after the results were released.

Oil Search aims to make a final investment decision on the Alaska project in 2021, aiming to start producing in 2025.

In PNG, Oil Search's growth projects have stalled due to tough bargaining by the government, but the pain of the oil price slump has led to a reopening of talks, Wulff said.

Wulff said he was confident the $13 billion twinned PNG LNG expansion and Papua LNG project, led by partners Exxon Mobil Corp and Total SA, will go ahead in time to meet a window of demand for new LNG forecast from 2027.

Oil Search's core profit after tax for the six months to June slumped to $24.7 million from $165.2 million a year earlier - far short of a broker consensus forecast of $61 million - as its average realized oil prices dropped 45% and LNG prices fell 15%.

Including writedowns on its PNG exploration assets, the firm slumped to a net loss of $266 million.

Investors shrugged off the result, sending Oil Search's shares up 0.7%, roughly in line with oil price gains. 

(Reporting by A K Pranav and Soumyajit Saha in Bengaluru and Sonali Paul in Melbourne; Editing by Richard Pullin and Christopher Cushing)

Categories: LNG Production Gas Papua New Guinea

Related Stories

BP Expands Oil and Gas Scope in Azerbaijan with New Projects and Exploration Rights

Indonesia's Medco Starts Production at Natuna Sea Fields

China's ENN, Zhenhua Oil Ink LNG Supply Deals with ADNOC

INEOS Wraps Up Acquisition of CNOOC’s US Oil and Gas Assets

CNOOC Sees 11% Profit Growth in 2024 Driven by Record Oil Production

CNOOC Starts Production at Two New Oil and Gas Projects

All Gas from Conrad’s Mako Field to be Sold to Indonesia’s PLN

Tokyo Gas Enters LNG Market in Philippines

CNOOC Starts Production at Offshore Oil Filed Equipped with CCUS Tech

Japan's Mitsui Eyes Alaska LNG Project

Current News

MODEC, Carbon Clean to Advance FPSO-Mounted Carbon Capture Tech

Aker Solutions, PTAS JV Hooks Brownfield Services Extension off Brunei

CDWE Wraps Up Pin Pile Installation Job for Taiwanese Offshore Wind Farm

BP Expands Oil and Gas Scope in Azerbaijan with New Projects and Exploration Rights

Azeri SOCAR Plans New Agreements with Oil and Gas Majors

TPAO, SOCAR and BP to Ink Caspian Sea Oil and Gas Production Deal

Fugro Lands Deepwater Gas Field Job in Southeast Asia

OMV Exits Ghasha Gas Project off UAE with Lukoil Stake Sale

China's Sinopec Laucnhes $690M Hydrogen Venture Capital Funds

CIP, ACEN Partner Up for First Large-Scale Offshore Wind Farm in Philippines

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com