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Oil Search says 2012 will provide good growth chances

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Oil Search says 2012 will be a potentially transformational year for the company, presenting an unprecedented opportunity to grow the value of its assets.

Port Moresby-based Oil Search said in a presentation lodged with the Australian Securities Exchange on Tuesday that 2012 would be a year of “peak activity” for its liquefied natural gas (LNG) project in Papua New Guinea.

Also, the largest drilling program ever undertaken by Oil Search was underway and would continue through 2012 and into 2013, and there was potential upside for both gas and ongoing oil production.

Oil Search said it was likely to be PNG’s largest single investor in 2012, with more than $US2 billion ($A1.97 billion) to be spent on development, appraisal, exploration and operations.

Oil Search said its guidance for the production of oil and gas from existing fields in 2012 was in the range of 6.2 million to 6.7 million barrels of oil equivalent (mmboe), unchanged from 2011.

Production in 2013 was expected to be broadly flat, subject to the success of work programs.

“We are in the midst of a period of heavy investment and have a range of exciting growth opportunities ahead,” Oil Search chairman Brian Horwood told shareholders at the company’s annual general meeting in Port Moresby.

He said that during 2011, major construction progress had been made on all facets of the PNG LNG project and a range of LNG-related modifications to Oil Search’s oil field processing and liquids export facilities had been completed.

“We expect to have the capability to produce commissioning gas by the end of 2012,” Mr Horwood said.

“The project remains on track to commence first LNG sales in 2014 and, apart from the impact of adverse exchange rate movements that were announced late last year, remains on budget.”

Mr Horwood also said that there had been considerable political uncertainty in PNG over the past year, which has created some concerns within the banking and investment communities.

“Despite the political instability, neither the PNG LNG project nor our operations have been disrupted,” he said.

An election in PNG is expected in June/July 2012, with a new government formed in August/September.

Oil Search anticipated no change to its operating status but said it would be cautious and watchful.

Oil Search shares were up two cents at $$7.14 on Tuesday.