News: Oil Search lifts Q2 output, confirms guidance, page-2

PNG LNG overcomes ‘difficult’ market Blair Price Wednesday, 23 July 2014


THE ExxonMobil-led PNG LNG joint venture has “traded well in a difficult market”, according to Macquarie Private Wealth, which maintains an outperform rating on key PNG LNG partner Oil Search. PNG LNG project map courtesy of ExxonMobil. While the Papua New Guinea-focused oil and gas producer’s June quarter sales volumes of 3.22 million barrels of oil equivalent were considered in line with MPW’s forecasts, its analysts said Oil Search’s total revenue of $US339.7 million ($A360 million) in the period was “6% ahead due largely to higher LNG realisations than anticipated”. “Despite the weakening Asian spot LNG price – to which PNG LNG is currently exposed – gas realisations of $14.41 per million British thermal units were 13% ahead of our forecast and 4% above the average spot LNG price during the quarter, suggesting the JV traded well in a difficult market,” MPW said in its report on Oil Search. The analysts also found that Oil Search ended up spending $100 million less than they expected in the recent quarter. PNG LNG, which started first exports from the first of the two trains in May, is expected to hit nameplate capacity of 6.9 million tonnes per annum by year-end. MPW said it could trigger early financial completion, which will see Oil Search’s funds released from escrow. But it said Oil Search’s newer and cheaper $250 million revolving credit facility, the $170 million it raised from a share purchase plan and early LNG revenue appeared to give the company ample liquidity to see it through to LNG financial completion. MPW also rated the planned Hides field and Elk-Antelope field drilling in PNG, plus the Taza-3 well in Iraq’s Kurdistan region, as giving Oil Search the sector’s “most exciting drilling program with relatively large and low risk prospects”. “This comes in the wake of the encouraging G-pad results in Hides, which have seemingly added to 1P reserve estimates and the Taza-2 result, which has found oil in all three target reservoirs,” MPW commented. The broker has a 12-month price forecast of $A10.50 for Oil Search shares, made when they were $9.54.