XOM Exxon Mobil Corp

   By Robb M. Stewart 
 

MELBOURNE, Australia--Papua New Guinea-focused Oil Search Ltd. (OSH.AU) said it is on track to hit its production target for the year, with costs reined in, despite a dip in first-quarter output.

Quarterly production slipped almost 2% quarter-over-quarter to 7.57 million barrels of oil equivalent, as a strong performance from the PNG LNG gas export venture was offset by lower production from the company's mature oil fields.

Sales for the period were down more sharply, falling 9% to 7.22 million barrels due to the timing of shipments as the quarter ended with three LNG cargoes at sea, but a recovery in prices meant that the quarter's revenue eased just 0.5% on-quarter to US$343.7 million, Oil Search said.

The company, based in the Papua New Guinea capital of Port Moresby and listed in Australia, said it remained on track to deliver production of between 28.5 million and 30.5 million barrels in 2017 but with production costs reduced to US$8-US$10 a barrel from the US$8.50-US$10.50 previously forecast.

Oil Search's main asset is a 29% stake in the PNG LNG development operated by Exxon Mobil Corp. (XOM) that began producing in April 2014. It also owns assets including an almost 23% interest in the prospective Elk and Antelope gas fields in Papua New Guinea being developed by France's Total SA (TOT).

First-quarter production, although down, was still one of the highest ever achieved by the company, said Managing Director Peter Botten.

He added talks began during the quarter between Exxon, Total and Oil Search on how best to develop the Elk-Antelope fields and other assets in Papua New Guinea, potentially making use of the PNG LNG project's infrastructure.

"We expect talks regarding potential cooperation and integration of the next phase of LNG development to continue on an accelerated basis during 2017, leading to the delivery of binding commercial agreements before year end," Mr. Botten said.

Oil Search ended March holding US$1.02 billion in cash, plus US$750 million in credit facilities.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

April 18, 2017 20:38 ET (00:38 GMT)

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