Oil producer Oil Search Limited (ASX: OSH) today announced a significant 33% increase in contingent resources in its Pikka oil field in Alaska. This takes its total gross Alaskan North Slope 2C resources within Oil Search’s portfolio from 728 million barrels of oil to 968 million barrels of oil, a 93% increase from its original estimate in 2018.
The Oil Search share price is down by 2.36% at the open of trade today to $3.73 amidst a broader fall in the ASX.
More details on the find
Oil Search told an investor conference this morning that the Pikka project was now well positioned for its Phase-1 single drill site in early 2021. The development will use a capital efficient approach that will deliver a breakeven cost of less than US$40/barrel, with gross capital costs of under US$3 billion.
Production from Phase-1 will support the funding for Phase-2, which will comprise the full field development incorporating two additional well pads. It expects first oil from this project in 2025.
Other news from the briefing
Oil Search said the COVID-19 pandemic had helped the company become more resilient as it made efforts to reduce its cost base.
Speaking at the conference this morning, Oil Search managing director Dr Keiran Wulff told investors:
The challenges posed by the pandemic and oil price downturn, combined with global trends and societal expectations, have been the catalyst for us to review our past performance and make sustained improvements to position Oil Search for long term success.
Mr Wulff said the company strategy included three disciplined phases: driving sustained low costs of its PNG operations, commercialising the Pikka development at a breakeven cost of less than US$40/bbl, and considering targeted complementary energy investments.
About the Oil Search share price in 2020
The Oil Search share price is a top performer over the past month, beating the overall energy sector’s performance on the back of coronavirus vaccine news. However, like all energy producers, it has not had a year to remember. In October, the company delivered disappointing third-quarter results, and said that it did not expect LNG demand to fully recover until 2027.
The Oil Search share price has lost 45% of its value this year. At today’s price of $3.73, it commands a market cap of $7.7 billion.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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