The Oil Search Limited (ASX: OSH) share price is flat today following the release of its Q3 FY20 results.
At the time of writing, shares in the oil and gas company are down 0.1% to $2.86. Let's take a look at how Oil Search progressed in the third quarter.
Q3 trading update
Oil Search achieved a mixed performance for the period ending 30 September.
Total production remained relatively unchanged from the prior quarter, up 0.1% to 7.3 of million barrels of oil equivalent (mmboe). Although there was a 7.2% increase on the prior corresponding period. This was underpinned by the ExxonMobil-operated PNG LNG project which continued to perform above expectations, offsetting COVID-19 challenges.
Total hydrocarbon sales jumped 11.2% to 7.55 mmboe on Q2 FY20 and up 16.7% on the pcp.
Total revenue however, fell 29% to US$189 million, and a 47.6% decline on Q3 FY19. The lower revenue was due to a large reduction in the average realised LNG and gas price. Other revenue comprising of rig lease income, infrastructure tariffs, electricity, refinery and naphtha sales also dropped to 32%, US$5.6 million.
Oil Search advised it had a liquidity of US$1.65 billion, including US$752.7 million in cash and US$895.6 million in undrawn credit facilities.
COVID-19 update
As the pandemic has caused challenging market conditions, Oil Search has continued to operate under strict COVIDSafe protocols. The company's field-based workforce remains in quarantine zone to minimise the risk of transmission across critical field teams.
COVID-19 has heavily impacted global energy prices, with LNG demand not expected to fully recover until 2027. To preserve capital, Oil Search cut its capital investment guidance to US$390 million and US$460 million.
Expansion plans
The company said that it had made significant progress in finalising the optimisation studies for the Pikka Unit Development. Oil Search has moved onto developing the resource which will deliver increased capital efficacy and project breakeven cost of supply.
The company will provide further details at the strategy day on 19 November.
In addition, discussions between the PRL 3 (P'nyang) operator ExxonMobil and the PNG government are ongoing. All parties hope to secure fair and balanced fiscal terms of the P'nyang Gas agreement. Oil Search is seeking to strengthen its portfolio as it sees a long-term positive LNG price outlook.
Comments from management
Commenting on the mixed result, Oil Search managing director Keiran Wulff said:
The ExxonMobil-operated PNG LNG Project continued to perform well ahead of expectations, producing at record levels of 8.8 MTPA on average for the first nine months of the year. This included 6.55 mmboe from the PNG LNG Project, which produced at an annualised rate of 8.9 MTPA during the quarter.
A primary focus during the third quarter has centred around finalising the longer-term strategy for our business, taking into consideration the global economic and investment conditions and trends, as well as ensuring the company is resilient to lower oil prices and well positioned to optimally take advantage of its world class assets and deliver full value when conditions allow.
