Oil Search projects slow amid Santos deal
The timelines for Oil Search’s Alaskan and Papua New Guinean projects has slowed with the producer seeking to seal a $21bn merger with Santos
Oil Search benefited from a surge in oil and LNG prices but its $US3bn Alaskan growth project has endured a delay as it works to seal a $21bn merger with rival Santos.
Third quarter revenue rose 12 per cent to $US409m from the prior three months with LNG prices jumping 16 per cent to $US10 per million British thermal units. Production of 6.9m boe marked a 5 per cent rise on the prior quarter.
“Both LNG and oil markets remain strong with spot LNG markets continuing to exhibit high volatility and record highs which is a supportive environment for market soundings in respect of new medium and longer-term LNG sales contracts,” Oil Search acting chief executive Peter Fredricson said.
Asia LNG prices have soared to a record level, smashing the previous high mark, amid a global energy crunch and supply fears, with Australian exporters in line for a bounty if producers can sell spare cargoes on the spot market.
Oil Search, in talks to seal a $21bn merger with Santos, said it was spending less on its Pikka oil development in Alaska while fewer contractors were working in Papua New Guinea due to Covid restrictions.
A final investment decision had originally been due by the end of this year on the $US3bn Pikka Alaskan oil project but earlier this year it pulled back from any timeline until commercial deals to sell down its stake and attract funding were in place.
Oil Search now expects to make a call on sanctioning Pikka in the first half of 2022 amid market expectations that Santos will sell Oil Search‘s stake in the project should the merger proceed.
The immediate timeline for its Papua LNG project has also changed with engineering and design now set to start in 2022 from a first half of 2022 date outlined in August.
Production for 2021 is forecast at 26-28m barrels of oil equivalent from the previous 25.5-28.5m boe range while spending has been cut to $US185m-$US275m from the prior $US250m-$US350m guidance.
A first court hearing for the Oil Search-Santos deal is being held in Papua New Guinea on Wednesday.
The two companies have signed a merger agreement, with Santos controlling 61.5 per cent of the beefed up producer to Oil Search’s 38.5 per cent, a sweetener to the previous 63-37 per cent ratio rejected by Oil Search’s board.
But with the deal requiring the approval of at least 75 per cent of shareholders at the November 29 meeting, there is growing talk that several institutional Oil Search shareholders still harbour concerns over the tie-up and whether the company is being handed over too cheaply to a major energy rival.
Oil Search fell 1.3 per cent to $4.42.