Oil and gas producer Oil Search Limited (ASX:OSH) released the fourth quarter production report and concluded that oil production in 2015 was the highest in the company’s history.
Production in the fourth quarter of 2015 was 1% higher compared to the third quarter, however sales were 10% lower at $342.9m. This was largely due to the lower average crude oil prices as well as lower production, which was a result of timing issues.
Total production in the further quarter was 7.51 million barrels of oil, taking full year production to 29.25 million barrels, 52% above last year’s performance and well above the company’s guidance.
Fourth quarter production from the PNH LNG project was 5.7 million barrels of oil equivalent. The company states that the project “continued to operate well over its nameplate capacity”.
The average realised LNG and gas price was US$8.41/mmBtu, 6% below the average price realised during the third quarter however the average oil price declined 14%. Oil Search produces at an average price of US$42.90 per barrel.
Oil Search’s Full Year Result and Strategic Review
Total revenue for the full year was US$1,585.7 million, marginally below last year’s $1,610.4 million. Whilst Oil Search suffered a $300 million drop in oil sales this year, LNG sales jumped by $280 million. Weaker prices were offset by higher production, however investors will be assessing the potential impacts during the year ahead. The average realised oil price for the entire 2015 was US$51.36 per barrel, however with oil prices currently trading around the $30 mark, the environment becomes increasingly challenging for Oil Search.
Net debt at the end of the year was slightly lower than 2014 at US$3.31 billion. Santos announced that “due to the significant downturn in oil prices in recent months, the Company is carrying out a comprehensive review of impairment across all its assets. “
However, production costs and depreciation and amortisation charges are expected to be within the previously advised guidance range. Total investment expenditure in 2015 was US$539.2 million with exploration expenditure below the guidance range.
OSH was last traded at $6.28, down more than 6% year-to-date. Over the past 12 months, the stock has depreciated 20.8%. (as at 25th January 2016).
Author: Simon Herrmann
Jan 27, 2016
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.