Oil Search slashes jobs in crude crunch
Oil Search will slash nearly 600 jobs, a third of its workforce, as part of a cost-cutting drive sparked by the oil price crash.
Oil Search will slash nearly 600 jobs, a third of its workforce, as part of a major cost-cutting drive sparked by the oil price crash.
The Papua New Guinea-focused LNG producer has already cut 427 roles and will trim a further 137 positions by the end of 2020, representing 34 per cent of its staff.
The gas operator laid off 100 staff in Sydney and its Alaskan operations in late March as the severity of the oil downturn became apparent.
Board members and its executive team will also see their pay lowered by 20 per cent over the next six months in response to the market rout.
Long-serving chief financial officer Stephen Gardiner will also leave the company as part of a restructure of the company‘s leadership team under new boss Keiran Wulff.
Dedicated teams have been assigned to review all capital and development projects with the aim of reducing break-even costs.
Guidance on one-off restructuring costs will be detailed in its first quarter report on July 21.
Oil Search has appointed Ayten Saridis, the current finance boss at Coronado Coal and a former AWE and Santos executive, to replace Mr Gardiner from August.
Bart Lismont, Oil Search’s technology boss, has been appointed to lead PNG development and operations with current PNG president Beth White - who was working on seal an LNG expansion with the PNG government - moved into a new role as sustainability and technology vice president.
A strategic review, which started in February, will be delivered in the second half of 2020, Mr Wulff said, with a focus on “redefining Oil Search for the future” by considering market trends, shareholder expectations and commodity market and pricing outlooks.
The company was forced into a $US650m ($1.08bn) share sale in April to institutional investors to boost its balance sheet but analysts warned the LNG producer may ultimately need to raise extra cash to fund its growth plans.
Oil Search has previously slashed its spending in March by 40 per cent in a bid to conserve cash after warning of “unprecedented times” in markets.
The Sydney producer, reeling from a then 70 per cent plunge in its share price since January, suspended a sale of its Alaskan oil project and will dramatically cut costs amid investor concern over its ability to handle a hefty debt burden.
Brent oil prices have since recovered to trade at $US41 a barrel from lows of just $US15, but remain well below the long-term assumptions used by major Australian producers including Oil Search.
Energy giant Shell said on Tuesday that several of its high profile Australian gas projects were to blame for a massive $US8bn-9bn ($11.7bn-$13.2bn) writedown triggered by lower prices amid a COVID-19 demand shock.
Australian oil and gas producers are expected to follow global majors in suffering writedowns in the coming months due to lower oil and gas prices, Macquarie warned on Tuesday.
The nation‘s top producers have typically used $US70-75 a barrel for impairment testing purposes compared with Brent crude which is trading at $US41 currently, following several months in sub-$US30 territory earlier this year.
Auditors may struggle to justify signing off June 30 company accounts which continue to project prices well over double current levels, according to industry sources, which could spell major impairments either for the industry at interim or year-end reporting dates.