The Oil Search Limited (ASX: OSH) share price failed to hold on to morning gains even after the oil and gas producer posted higher revenue is the latest quarter.
The OSH share price tumbled 2.5% to $7.60 during lunch time trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) shed 0.5% of its value.
Oil Search isn't the only stock to retreat in the afternoon though. The Woodside Petroleum Limited (ASX: WPL) share price dipped 0.3% to $33.83, the Origin Energy Ltd (ASX: ORG) share price lost 0.4% to $7.22 and the Santos Ltd (ASX: STO) surrendered its 1% morning gain to trade just under breakeven.
The sector's retreat shouldn't worry investors. Our energy stocks have been among the best performers on the ASX since Christmas and the modest consolidation is expected. The fall also comes on the back of thin trading as the US market is closed for a holiday.
Devil in the details
But those hoping that Oil Search's 6% increase in fourth quarter revenue over the previous three months to US$503.1 million would support the stock could be disappointed.
The market has taken a glass half empty view of the production report, which showed a 1% drop in production to 7.4 million barrels of oil equivalent (MMboe). This takes total production for 2018 to 25.2MMboe, or 17% lower than 2017.
The production drop shouldn't come as a surprise though as the devastating earthquake in the PNG highlands impacted on operations. The full-year production figure was also inline with the company's guidance range.
The falling oil price also detracted from the revenue growth figure with management reporting lower oil and condensate prices but higher LNG gas prices.
Investors may also have been hoping for more in regards to management's 2019 production guidance with management tipping total production to come in between 28MMboe and 31.5MMboe.
Foolish Takeaway
On the upside, Oil Search is expecting production costs for 2018 to come in at the lower end of its US$11.50 to US$12.50 per barrel guidance range. That is a relief as resource companies have been complaining about rising cost inflation.
Further, the production cost will include a US$65 million hit for earthquake recovery and repairs with just about half of the amount offset by insurance payouts to the company.
I suspect the Oil Search share price won't stay down for long if my expectations for firmer global oil prices play out this year, thanks to the US and China mending strained trade relations and OPEC and Russia refraining from breaking their production quotas.
