The Company
Oil Search (OSH) is engaged in oil and gas exploration in Papua New Guinea, as well as in Yemen, Iraq and Tunisia. OSH’s key projects in PNG include the PNG liquefied natural gas (LNG) project, three oil projects (Greater Moran, Gobe and SE Menanda), and the Hides gas-to-electricity (GTE) development. OSH was incorporated in 1929 and is headquartered in Sydney, Australia.
OSH’s profit was up 72% in 2014 to $353.2m, representing the highest profit in the company’s 86-year history. This was attributed to the first contribution from the PNG LNG project. Net profit after tax included a $129.6m after-tax impairment charge, largely related to the impact of lower oil prices on the carrying value of exploration and evaluation assets.
Sales volumes increased 164% in 2014 to 17.76m barrels of oil equivalent (boe) from 6.73m in the previous year. The increased volumes translated into stronger sales revenue for 2014, with revenue up 110% to $1.61bn. OSH had total liquidity of $1.56bn at the end of 2014, comprising $960.2m in cash and $600m in undrawn committed funding lines. Earnings per share increased 54% to $0.238 from $0.154, representing a payout ratio of 44%. OSH declared a final unfranked dividend of $0.08 together with a special dividend of $0.04 a share. OSH also paid a $0.02 interim dividend earlier in 2014. This brings the total dividend for the year to $0.14 a share, representing a 44% payout ratio on the core profit.
Recent Developments
OSH’s 2P gas reserves and 2C contingent gas resources increased 25% to 5.81trn cu feet. This was boosted by booking 2C contingent resources for the Elk-Antelope fields in PNG under petroleum retention licence (PRL) 15. OSH has a 22.835% gross interest in PRL 15 after acquiring the share previously held by the Pac LNG Group of Companies for $900m in 2014.
In related news, in a complex, non-unanimous decision, the International Court of Arbitration of the International Chamber of Commerce declined to issue pre-emptive rights to the OSH-owned Pac LNG Group of Companies over the March 2014 sale of a 40.1% interest in PRL 15, which was made from an InterOil subsidiary to a subsidiary of Total. Ultimately, however, the arbitration process has had no impact on the appraisal programme, with the Antelope-4 and Antelope-5 wells spudded in the second half of 2014. Key information from this drilling programme will help define the size, reservoir connectivity and productivity of the Elk/Antelope field.
Antelope-4 in PRL15, the most southern well on the Elk-Antelope field, started drilling on September 16, 2014. The well intersected the top of the carbonate reservoir at 1911 metres true vertical depth sub-sea, in line with expectation, and has eliminated the risk of a steeply dipping southern flank.
For its part, the Antelope-5 appraisal well in PRL 15, which is located in the western extent of the ElkAntelope field, intersected the top reservoir at 1534 metres, at a position that was 230m higher than the operator’s reference case.
As part of the 2015 appraisal drilling campaign, the PRL15 joint venture (JV) has selected the location of the Antelope-6 well to help provide structural control and define reservoir quality on the eastern flank of the field. Site preparation is already under way and, following final approvals, drilling is planned to begin in mid-2015.
OSH also holds 38.51% of PRL 3, which includes the P’nyang gas field. A memorandum of understanding (MoU) signed for the P’nyang gas field in January 2015 between ExxonMobil PNG, PRL 3 JV and the PNG government will see the potential construction of a third LNG train. This MoU also sets out a firm roadmap for the development of the resource, which is a central growth asset in OSH’s portfolio.
In April 2015 OSH announced that the first phase of the Ramu Power Project, which is fuelled by OSH’s Hides GTE development, has been completed and is now providing 24-hour power to the city of Tari.
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