Oil Search forecasts 2010 production to decline 10pct

Oil Search Ltd., Papua New Guinea’s largest oil and gas producer, forecasts this year’s production to fall about 10 percent and operating costs to rise as its liquefied natural gas project with Exxon Mobil Corp. advances.

The oil and gas producer’s output is set to drop partly because of a “natural” decline in its fields, Port Moresby- based Oil Search said in a statement to the Australian stock exchange today. Sales in 2009 fell 38 percent to $476 million because of lower oil prices and production, Oil Search said.

Oil Search fell to a six-month low, declining 1.1 percent to A$5.36 in Sydney trading. That compared with a gain of 0.6 percent for the benchmark S&P/ASX 200 Index. The shares have dropped 13 percent this year.

Oil Search, Exxon’s partner in the $15 billion LNG project in Papua New Guinea, said first fuel sales are expected in 2014. The venture, one of more than 12 in Australia and neighboring Papua New Guinea seeking to meet growing Asian demand for the cleaner-burning fuel, was approved by the partners in December.

The shares have slumped in 2010 partly based on “the belief that few short-term positive catalysts exist to drive the stock higher,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., said in a report to clients today. “While we don’t disagree, we remain positive on the stock given our bullish view on oil prices.”

Oil will reach $80 a barrel in 2010 and $100 a barrel next year, he forecasts. Crude oil traded near $74 a barrel today.
The LNG project will add about 19 million barrels a year to production when sales begin, Peter Botten, Oil Search’s managing director, said in a statement. The venture will lead to a ninefold increase in oil and gas reserves, the company said.

Production fell 6 percent to 8.12 million barrels of oil equivalent last year, within the company’s expected range, according to the statement. The price the company received for its oil last year dropped 35 percent to $65.39 a barrel.

Production for the quarter ended Dec. 31 was 2.22 million barrels of oil equivalent, compared with 2.15 million barrels a year earlier. Oil Search’s operating costs are expected to climb, “reflecting increased in-country cost pressures as PNG LNG activity ramps up,” the company said.

http://www.bloomberg.com/apps/news?pid=20601081&sid=akRJan6diXco

 

Category: ResourceAsia