PNG LNG is a project on a global scale, which is expected to produce 9 trillion cubic feet of gas and 200 million barrels of associated liquids over its 30 year lifetime. The project will primarily derive gas from the Hides, Juha and Angora gas fields which are located in the western and the southern provinces of PNG, and the capacity of the project is estimated to be 6.6 million tons per annum. ExxonMobil's subsidiary, Esso Highlands Limited, is the operator of this project, and Oil Search Limited, Kroton No. 2 Limited, Santos, JX Nippon Oil and Gas Exploration Corporation, Mineral Resources Development Company and Eda Oil are the other companies involved in this co-venture. The cost of the initial development phase of this project is estimated at $15 billion. Oil Search has around 29% interest in the project.
The impact of the PNG LNG project on the company's production will be significant, as the company's production will be approximately quadrupled in 2014. Production is expected to increase from 7.7 MMboe in 2010 to 23.1 MMboe in 2014. Apart from the company's production capacity, oil and gas mix will also be changed significantly due to its PNG LNG project. It is expected that by 2015 the company's oil and gas mix will change to 30:70 in 2015 from the level of 90:10 earlier. Therefore, after the beginning of the project, Oil Search will primarily be a gas focused company. The oil percentage in the mix will decline from around 92% in 2007 to around 31% in 2015. This is reflected in the graph below.
Oil Search has already registered proven and probable (2P) resources of 505 MMboe in its reserve base, and the company expect the implementation of this project to prove to be a steady source of long-term revenue. A reason for the company's high revenue expectations of this project is that both the PNG and Australian governments are providing full support to the PGN LNG Project. Furthermore, this project is expected to have a high reserve base and a high liquid content. Liquid content is expected to comprise 15% of the total revenue stream, ensuring the stability of cash flows.
The company also expects that revenue generated by this project will largely be driven by demand from the Asian LNG market. LNG demand is expected to increase by 5% per year until 2020, and countries such as China and India will be the major buyers of gas. Furthermore, this project has an advantage in terms of location as it is well placed to serve the Asian market. The PNG LNG Project has already entered into gas sale agreements and 6.5 MTPA of gas has already been contracted to the following companies:
Optimization of Production Through New Field Developments and PNG Projects
Oil Search currently derives all its production from mature assets located in the PNG Region. However, due to the maturity of these fields, the company has registered a decline in its production. The company is attempting to optimize its production through near field opportunities, new development opportunities (PNG LNG project) and cost reduction initiatives.
The company is undertaking several drilling programs in existing projects in order to optimize production. The production from the Kutubu Oil project benefited from the new wells drilled in the Agogo Fields in 2009m and more wells are being tested in the same region in order to further explore potential. Currently, the company is also redeveloping its Moran Oil Project, and in 2010, a new block (Moran-C) was appraised and confirmed the presence of oil. Oil Search has been carrying work-over programs are also being undertaken at several other fields with the help of Hydraulic Workover Units to upside the production level.
Additionally, the company announced plans to add new production from the PNG LNG project, one of the major future projects for the company. PNG LNG is an integrated LNG project being operated by the subsidiary of Exxon Mobil, Esso Highlands Limited. The project is expected to produce 9 trillion cubic feet of gas and 200 million barrels of associated liquids over its project life of 30 years and Oil Search has already recorded 505 MMboe of 2P reserves in its reserve base. The company expects this project to be completed on time and within the defined budget. In addition, the company aims to construct an additional LNG train as it expects that it will have sufficient proved gas reserves by late 2012.
The execution of the PNG LNG project started in March 2010 with the closure of financial arrangements, and is expected to commence the first LNG shipments in 2014 following a four year construction period. In 2011, the company plans to accelerate the construction activities of this project, by starting to lay both offshore and onshore pipes and continuing the construction of an LNG facility in Port Moresby. The cost of the project is estimated to be $15 billion in the initial phase (2010-2014), and Oil Search is ensuring sufficient liquidity for the purposes of financing this project. The company established a five year revolving credit facility of $435m in 2008 and in December, 2010, had a debt of around $930m.
The PNG LNG Project is expected to have a huge impact on both PNG's economy and its people. The company is attempting to ensure an open dialogue with all stakeholders including the government in order to resolve issues related to business development and the provision of seed capital. The Project is expected to provide infrastructure synergies which will help Oil Search accommodate future LNG trains, which can only be established when the company has enough proved gas reserves. The company plans to expand the PNG LNG project by utilizing gas reserves located in the Foldbelt / Highlands areas.
Furthermore, Oil Search is also undertaking active cost management in order to maximize the profits from declining production. During the last number of years, the company has been aiming to reduce operating costs; however this strategy has been impeded by inflationary pressures and the strong Australian dollar, which have driven up the costs. The company also reduced its headcount in 2008 in order to reduce manpower costs. In 2010, total operating costs increased by 2% from $79.6m to $81.3m, due to the implementation of such strict cost control measures.
Despite the fact that the company's existing production has been declining continuously, Oil Search is planning to improve the production through the production through new redevelopment projects, PNG LNG Projects and cost reduction initiatives. Still the company is highly dependent on PNG LNG project for which it is fuelling the project through its existing assets performance. It is expected that the company will be able to optimize its production profile through PNG LNG project in combination with its redevelopment and cost initiative programs.
Scope
- Key Highlights: This section provides detailed analysis on the company's overall oil and gas value chain, new projects, growth opportunities, new ventures, assets performance, hedging strategies, Capex funding, geographical results of oil and gas operations.
- Goals and Strategies: This section provides the upcoming goals and strategies of the company. The section mainly goals and strategies followed by the company in order to meet its upcoming goals.
- SWOT: The report's SWOT section provides the internal strength, weakness, opportunities and threats of company to reflect its strategic positions in the market.
- Key Events for 2011: This section provides the company's expected operational and financial activities in 2011. This section maps the company's focus for 2011 in nut shell.
- Production and Development Overview: This section highlights the company's crude oil and natural gas production forecast from its legacy and upcoming assets by region and commodity mix for next five years. The report also covers the detailed information and analysis on the company's producing and development assets.
- Exploration: This section includes detailed explanation and analysis on the company's exploration assets resulted due to new discoveries, new drilling and other activities.
- M&A trends: This section mainly provides information and analysis on the company's recent assets transactions, joint ventures, acquisition, and divestment activities during the last one year. This section highlights the company's status as a buyer or seller during the analyzed period.
- Financial Forecast and Valuation: This section highlights the detailed financial statement forecast for next five years. With the financial statement forecast, this section also provides intrinsic value of the company by using Net Asset Valuation method.
- Peer Group Analysis: This section compares the company's performance with its peer group on the basis of share prices, financial ratios, operational and financial parameters and other related parameters.
- Financial and Operational Metrics: This section covers the company's historical performance on several financial and operational parameters such as Production and Reserves, Reserves Replacement, Costs Incurred, Acreage, Wells, F&D Costs, Oil and Gas Revenue and Expenses etc.
Reasons to buy
The report will enhance the decision-making capability in a more rapid and time sensitive manner. It will allow you to -
- Provide detailed analysis to those who are interested in knowing the companies' existing and future business strategies.
- Provide in-depth analysis on the companies E&P profiles along with the exploration and M&A updates.
- Provide valuable insights to those who are tracking oil and gas markets and wants to know the intrinsic value of the companies.
- Use the analysis for strategy and planning, M&A identifications, and competitor analysis.
[- London 6/28/2011 12:32 AM GMT (TransWorldNews) - http://news.wooeb.com/]
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