Oil Search Expects Taza Writedown as Oil Plunge Prompts Review

Oil Search Ltd. expects to write down the value of its Taza oil project in Kurdistan as the company carries out a broader asset review and looks for further cost cuts after the collapse in crude prices.

The company expects the only “material impairment” for 2015 will be related to Taza after disappointing drilling last year, Port Moresby-based Oil Search said Wednesday as it posted a 39 percent decline in fourth-quarter sales. The company didn’t quantify the size of the writedown.

Oil Search is among energy companies grappling with the slide in oil prices as volatility in global markets adds to concern over ample U.S. stockpiles, unfettered Saudi Arabian and Russian output and an expected revival in Iranian shipments. Australia’s Woodside Petroleum Ltd. said last week that it expects writedowns of as much as $1.2 billion for 2015.

“While Oil Search’s production generates positive cash flow even at the current depressed oil prices, the company is presently re-assessing its 2016 work programs and is looking for opportunities to optimize its activities, improve efficiency and further reduce its cost base,” according to the statement.

Oil Search, Exxon Mobil Corp.’s partner in a liquefied natural gas project in Papua New Guinea, targets production of 27.5 million to 29.5 million barrels of oil equivalent for 2016, according to the statement. That compares with a record 29.3 million barrels for last year, helped by the LNG project.

The company’s sales in the quarter fell to $342.9 million, from $562.1 million a year earlier. Oil Search in September rejected Woodside’s $8 billion takeover offer, with the Perth-based producer abandoning its bid almost three months later.

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