Australia’s third largest pure oil and gas company (behind Woodside Petroleum and Santos), Oil Search Limited (ASX: OSH) has reported a 7.4% increase in first half sales to US$398.5m over last year, despite falling crude oil prices. The oil and gas producer also reconfirmed its guidance to produce between 6.2 million barrels of oil equivalent (mmboe) and 6.7 mmboe for the full year to December 2012. The company operates all of Papua New Guinea’s (PNG) currently producing oil and gas fields.
Oil Search has 29% in a joint venture which is developing a Liquified Natural Gas (LNG) plant in PNG, expected to cost around US$15.7 billion, which is expected to deliver its first gas in 2014. Over its 30-year life, the PNG LNG project is expected to produce more than 9 trillion cubic feet of gas and more than 200 million barrels of associated liquids. Expectations from investors are high, with the company trading on a P/E ratio of over 44.
Mirabela Nickel Limited (ASX: MBN) announced that second quarter production of nickel concentrate rose 15% over the previous quarter, and remained on track to meet its full year production forecast. The company expects to produce around 19,000 tonnes of nickel in concentrate for 2012.
Despite the good news, investors have shrugged off the results, and shares are down more than 5% in morning trade to 23.7 cents, and down 87% since July 2011. In May, the company was forced to raise $120 million in new equity to shore up its balance sheet, following a sliding nickel price. According to the Australian Financial Review, the nickel price is just a few cents above the company’s production price. Further falls in the nickel price would obviously have serious consequences for the viability of the company.
Atlas Iron Limited (ASX: AGO) is Australia’s fourth largest iron ore miner, with low production costs and big expansion plans. The company estimates it costs less than A$50 to produce a tonne of iron ore, which gives it a healthy margin at the current iron ore price of around US$130 a tonne, and a decent buffer should the price fall further. In the last quarter, cash costs were around $42 per tonne.
Atlas shipped 5.6 million tonnes of ore in the 2012 financial year, and plans to double that to 12 million tonnes per annum (Mtpa) by December 2013. With more than 1 billion tonnes of estimated iron ore reserves, the company could be producing iron ore for many, many years. The current issue for Atlas is the expansion requires rail and port facility investment, and the company is looking at an independent railway in conjunction with QR National Limited (ASX: QRN).
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