The Oil Search Ltd (ASX: OSH) share price is on the move today following the release of its first quarter update.
In early trade, the energy producer's shares are down 1.5% to $3.72.
How did Oil Search perform during the first quarter?
For the three months ended 31 March, Oil Search's total net production came in at 6.9 mmboe.
This was down 2.7% from the fourth quarter and 6.8% from the prior corresponding period. Management advised that production was impacted by an unplanned Hides shutdown.
However, thanks to a sharp rise in realised prices during the quarter, Oil Search recorded first quarter operating revenue of US$301.5 million.
This was up 16% from the fourth quarter. However, with LNG and gas prices still down meaningfully from a year earlier, operating revenue dropped 16% on the prior corresponding period.
Nevertheless, the company finished the period with an improved liquidity position. At the end of March, Oil Search had US$1.57 billion of total liquidity.
What about the rest of FY 2021?
Pleasingly, despite its weak first quarter, Oil Search's production guidance for FY 2021 remains unchanged.
Another positive is that its investment expenditure guidance has been reduced by between US$75 million and US$95 million. This is being driven by cost savings and the effects of travel restrictions in PNG.
Also remaining unchanged is its unit production costs guidance of US$10.50 to US$11.50 boe.
Though, one item that has been revised higher is its other operating costs guidance. Oil Search now expects these costs to be US$20 million higher than its previous guidance at between US$145 million to US$165 million in FY 2021.
This change has been made to reflect the cost of its hedging program announced in February and for higher royalties and levies resulting from higher realised prices.
Management commentary
Oil Search's Managing Director Dr. Keiran Wulff said "Oil Search has maintained stable operating performance during the quarter amid challenging logistical conditions imposed by COVID-19 in PNG in particular. With escalating cases in PNG, Oil Search continues to deploy stringent mitigation and protective measures such as strict quarantining of our staff and segregation of our field activities from local communities. Notwithstanding this, Oil Search continues to offer support to the PNG and Australian governments in helping to combat the outbreak."
"Our operated assets at Moran and Agogo significantly outperformed our budget expectations and helped offset lower PNG LNG production, which was impacted by a short shutdown at Hides. Despite the short shutdown, PNG LNG continued to deliver all long-term contracted cargos."
