By Ross Kelly
SYDNEY--Oil Search Ltd. (OSH.AU) warned Friday its revenue will
slip in the second quarter of its fiscal year, as tumbling oil
prices start to weigh on contract prices for liquefied natural
gas.
The Australian company is a partner of Exxon Mobil Corp. (XOM)
at the US$19 billion PNG LNG project in Papua New Guinea, which
started shipping its first cargoes of the cleaner-burning fuel to
Asian customers in May last year.
Due to a roughly three-month time lag between spot oil prices
and LNG contract prices, Oil Search's revenue remained relatively
robust during the first quarter of 2015, Chairman Rick Lee told the
company's annual shareholder meeting in Port Moresby.
But he added the company's LNG revenue is expected to fall in
the second quarter, as an oil-price slump that commenced in late
2014 starts to have an impact. "While the oil price has since
rallied a little, it is still trading some 40% lower than the
average price realized in 2013," he said.
Oil Search's balance sheet is relatively strong, owing to
revenue from the start of LNG shipments earlier this year. The
company said the Exxon-led venture may make a final decision on an
50% expansion in the size of PNG LNG by 2017.
A separate LNG venture in the country between Oil Search, Total
SA (TOT), and Interoil Corp. (IOC) hopes to make a final investment
decision on the country's second LNG project in 2017, too, Oil
Search said.
Write to Ross Kelly at ross.kelly@wsj.com
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