BPT Beach Energy Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--Oil Search Ltd. (OSH.AU) has launched a review of potential impairment charges across its assets and is reassessing work planned for the year ahead in the face of depressed oil and natural gas prices.

While the review continues, the Papua New Guinea-based energy company said the only material charge it expects for 2015 will be against the majority-owned Taza PSC operation in the Kurdistan region of Iraq, which currently has a book value of US$399.3 million.

The sharp fall in crude-oil prices has hit Sydney-listed energy companies hard, prompting a raft of hefty impairment charges. Oil Search said that although its production in the fourth quarter of 2015 exceeded the top end of its earlier guidance, the slump in oil and gas prices pulled quarterly revenue down 9.5% compared to the prior three months.

Larger oil and gas producer Woodside Petroleum Ltd. (WPL.AU), which in December abandoned a takeover bid for Oil Search, last week warned it faced an after-tax impairment charge for the year of as much as US$850 million to reflect lowered oil-price assumptions. That came after BHP Billiton Ltd. (BHP.AU) said weaker prices for oil and natural gas were likely to lead to an about US$4.9 billion charge, after tax, against the carrying value of its onshore U.S. oil and gas assets.

Santos Ltd. (STO.AU) has said it expects to book reductions in the carrying value of assets and in its reserves, and Beach Energy Ltd. (BPT.AU) said it would take impairment charges of up to 650 million Australian dollars (US$455.4 million), before tax.

Oil Search said its production generated positive cash flow, even at current oil prices, yet it was reassessing its 2016 work program and was seeking opportunities to reduce costs further. It would continue to prioritize the development of new liquefied natural gas projects in Papua New Guinea, which are considered among the most commercially attractive globally, it said.

The company's production nudged up 1.2% on-quarter to 7.51 million barrels of oil equivalent in the final three months of 2015, and jumped 52% for the year to 29.25 million barrels. As recently as October, Oil Search had forecast production for the year of 27 million-29 million barrels.

For 2016, Oil Search said it expects to produce between 27.5 million and 29.5 million barrels of oil equivalent.

Still, fourth-quarter revenue fell to US$342.9 million from US$379.0 million in the previous quarter. For the year, it dropped to US$1.59 billion, from US$1.61 billion in 2014.

Oil Search's main asset is a 29% stake in a US$19 billion liquefied-natural-gas development in Papua New Guinea known as PNG LNG, which is led by Exxon Mobil Corp. (XOM). It is involved in other gas fields in the South Pacific nation, including a project being developed in partnership with Total SA of France.

The company in mid-September rebuffed an all-stock takeover offer from Woodside that had valued it at US$11.6 billion, arguing it was opportunistic and too low.

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

(END) Dow Jones Newswires

January 26, 2016 17:54 ET (22:54 GMT)

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