Oil Search's Q1 Revenue Drops 10%

Sydney-listed Oil Search April 21 reported a near 10% yr/yr drop in revenue for the three months to March 31 (Q1 2020) owing to lower product prices.

The company’s revenue for the quarter was A$359.4mn (US$226mn), lower than the A$398.1mn for the same period last year. The average oil and condensate price realised during the quarter was US$49.51/barrel, down 20% yr/yr, reflecting the steep decline in global oil prices from early March, Oil Search said. The average price realised for LNG and gas sales was US$9.08/mn Btu versus US$10.15/mn Btu in the same quarter of last year. The drop was less significantly less than the drop in oil price due to the two to-three month lag between the spot oil price and LNG contract prices, the company said.

Oil Search’s production during the quarter was 7.37mn barrels of oil equivalent, up 1.65% yr/yr. The company has maintained its full-year production guidance at 27.5 – 29.5mn boe.

The company said a systematic review is underway to reduce operating and corporate costs and improve the productivity of the operated assets. It is targeting a US$1–2/boe reduction in production costs in 2020, before any one-off restructure costs, from approximately US$11.5/boe to US$9.5–10.5/boe. Last month, Oil Search said it would cut its investments in 2020 by 38% in response to the steep decline in oil prices and the continuing spread of the coronavirus (Covid-19) pandemic.

“While the company is now in a robust position to withstand a sustained period of low oil prices, we are undertaking further measures to drive down breakeven costs across our business, targeting a reduction in production costs of US$1– 2/boe, and to enhance our capital management programs. This will ensure we are in a good position to progress our world-class growth projects in Papua New Guinea and Alaska when market conditions improve,” Oil Search's managing director Keiran Wuff explained.