Shares of oil and gas producer, Oil Search Limited (ASX: OSH), slumped as much as 6% lower today after the company released its quarterly production report.
In an ASX announcement, Oil Search reported a 1% increase in production, from 7.42 mmboe (million barrels of oil equivalent) to 7.51 mmboe, for the quarter ended 31 December 2015.
Total sales also rose 1% to 7.13 mmboe during the quarter. However, revenue fell 10% to $US342.9 million as a result of falling commodity prices.
Over the full year, Oil Search's production was a whopping 52% higher, but its revenue fell 2% to $US1,585.7 million.
During the quarter, rival Woodside Petroleum Limited (ASX: WPL) withdrew its non-binding takeover offer of Oil Search.
"Following a strong performance from both the PNG LNG Project and our operated oil fields during the fourth quarter, 2015 full year production was 29.3 mmboe, which was an all-time record for the Company and above the top end of our 27 – 29 mmboe guidance range," Managing Director, Peter Botten, said. "Despite the present oil price weakness, the PNG LNG Project co-venturers remain committed to pursuing PNG LNG Project expansion activities, as maximising production through the existing trains and the construction of a potential third train continues to offer attractive returns."
At the reporting date, Oil Search said it had available debt facilities totaling $US748 million and cash of $US910 million.
Mr Botten said the company's 2015 financial results will be released on February 23 2016, and that it is carrying out a comprehensive impairment review of its assets. The company said it expects a "material impairment charge to be recognised…with respect to the Taza PSC in Kurdistan (which presently has a book value of US$399.3 million), following disappointing appraisal drilling during 2015."
Foolish takeaway
It's common in the resources sector for miners to report write-downs or impairments on the carrying value of their assets when commodity prices take a turn for the worst. As we saw earlier this month, even the mighty BHP Billiton Limited (ASX: BHP) is not immune from reporting write-downs when prices slump.
And with no end in sight for low oil prices, it'd take a brave investor to wade into oil shares – even at these prices – in my opinion.
