Its quarterly report says total operating revenue, of US$66.9 million (A$88.8 million), was 34% down on that recorded for the fourth quarter of 2003, primarily because of a 38% drop in oil liftings due to the timing of export cargoes. Revenue was also impacted by the sale of the company’s interest in the PNG Porgera Gold Mine last November.
“It is expected that this imbalance will be equalised during the second quarter,” says the report.
Oil and gas production, at 2.839 mmboe, was marginally lower than in the fourth 2003 quarter, but 13% higher than a year ago, reflecting the impact of the purchase of ChevronTexaco’s PNG assets last October. Lower oil sales were partly offset by a higher realised oil price (US$35.18 per barrel), compared to the fourth quarter (US$30.89).
Oil Search’s second exploration well in Yemen, Nabrajah-1, discovered oil and was suspended as a potential future producer, having flowed in excess of 2500 bopd from two zones. Drilling activities in Yemen had been expanded, with Neheb-1, the first of two additional exploration wells, yesterday over 1703m down to its 2244m TD.
The wells in Block 43 are targeting Qishn S2 sandstone reservoirs, with secondary reservoirs prognosed in the Saar/Naifa formations.
Audited reserves for 2003 were 86.4 million barrels of oil equivalent, an increase of 10.8 mmboe on 2002 levels. Proven and probable reserves increased by 16.4 mmboe to a total of 134.6 mmboe; while reserve replacement, on a three-year rolling average basis, was 239% for proven reserves at US$5.08 per barrel, and 306% for proven and probable reserves at US$4.00 per barrel.
Oil production for 2004 was expected to be approximately 10.5 million barrels, compared with 9.3 million barrels for 2003.
“This represents strong reserve growth over the past three years, from both exploration and acquisitions, at a highly competitive cost. The resumption of active exploration in Papua New Guinea and acceleration of drilling in Yemen bodes well for continued reserves growth in the portfolio,” said managing director Peter Botten.
Subsequent to the end of the quarter, Oil Search completed its divestment of shares in Durban Roodepoort Deep Limited (DRD), which had been received in part consideration for the sale of its 20% interest in Porgera. The sale, at an average price of US$3.62 per share, realised US$24.0 million, bringing Oil Search’s total sale price for the Porgera interest to US$81.4 million.
The company also decided it wanted to start FEED for the PNG Pipeline Project as soon as possible, with a number of development options, including liquids cycling, which could proceed independently of the pipeline project being considered.
Oil Search is also finalising a pre-development agreement with Mitsubishi Gas Chemical and Itochu to carry out final feasibility work for the development of a methanol/DME plant in Papua New Guinea, leading to a decision on full FEED activities early in the fourth quarter of 2004.
