Oil Search Raises Output Goal on Record Papua New Guinea Gas

Updated on
  • PNG focused-producer says LNG expansion proposal progressing
  • Estimated last week $5 billion cost savings from collaboration

Oil Search Managing Director Peter Botten discusses the company's performance and earnings, and talks about the energy market. He speaks on 'Bloomberg Markets.' (Source: Bloomberg)

Oil Search Ltd., the Papua New Guinea-focused energy explorer, raised its full-year production target because of record output from the country’s liquefied natural gas project.

The company lifted the lower end of its 2017 production guidance to 29 million barrels of oil equivalent from the previous 28.5 million, while leaving the upper end at 30.5 million barrels, citing record output at PNG LNG, the company said Tuesday in a statement.

"Lifting of the bottom end of production guidance is positive, although we suspect given strong first-half production performance most had baked in top-of-the-range estimates," Sydney-based RBC Capital Markets analyst Ben Wilson said in a note.

Shares rose as much as 4.4 percent in Sydney to A$6.67, the biggest intraday gain since June 29, before paring their advance to 4 percent as of 12:05 p.m. local time. The benchmark S&P/ASX 200 index added 0.2 percent.

Capital spending this year has been trimmed to a range of $350 million to $400 million from $380 million to $480 million due to cheaper drilling and synergies from working with Exxon Mobil Corp. on a planned LNG expansion. The Sydney-based company also said Tuesday that net income in the January-June period rose more than fivefold to $129.1 million, barely missing the average $130.5 million from two analyst estimates compiled by Bloomberg.

Oil Search, which owns 29 percent of the Exxon-led PNG LNG project, reported last month that first-half output slipped 1 percent to 14.81 million barrels of oil equivalent, while revenue gained 16 percent due to higher prices. The company also owns a 22.8 percent stake in the Papua LNG development which is being developed by Total SA and co-owned by Exxon.

The company last week said it expects to save more than $5 billion over a 20-year period by routing gas from the Papua LNG project to the existing PNG LNG facility, rather than building a new greenfield plant. A preferred commercial model for the proposed LNG expansion is due in the fourth quarter of 2017, Oil Search’s Managing Director Peter Botten said Tuesday.

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