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Oil Search layoffs not in Alaska; Pikka advancing
Kay Cashman Petroleum News
The latest round of layoffs announced by Keiran Wulff, Oil Search’s managing director, on July 1 did not involve the company’s Alaska workers.
In charge of developing the big North Slope Pikka unit, Oil Search laid off Alaska workers in March and April.
“While seasonal contractors associated with our winter drilling and exploration programs represent the majority (of those layoffs), we have reduced full-time (Alaska) employees by about 15%,” local spokeswoman Amy Burnett told Petroleum News July 1, which brough the local total to 150 individuals, as previously reported.
The layoffs announced by Wulff were “unfortunate” and have “affected many of our colleagues overseas. That said, the recent round of reductions did not affect any of my Alaska colleagues,” Burnett said.
All told, Wulff said full time employees will be reduced company-wide from 1,649 as of March 1, to 1,222, with a further 137 staff members to be transitioned out by the end of the year.
To date, Oil Search has slashed its expected global investment spending by $675 million, suspending all non-essential projects and activities in Papua New Guinea. In Alaska work to begin early oil production in 2022 at Pikka was put on hold. Plus, the company suspended formal talks to sell off a 15% stake in its Alaska assets.
Oil Search also moved its final investment decision on its Pikka project from 2020 to 2021, but the company is still on track for first oil in 2025, Bruce Dingeman, president of Oil Search Alaska, said May 8.
Pikka is expected to produce 135,000-plus barrels of oil per day at its peak, not including output from the Horseshoe discovery area.
Reducing Pikka breakeven In February, Oil Search began a company-wide strategic review to re-evaluate its long-term vision, strategic focus and pathway for delivering superior shareholder returns. Given the market conditions over the past three months, the firm’s short-term focus has been on stabilization, resulting in cost cutting, the US$700 million capital-raising and the steps just announced. The result of those actions, Wulff said July 1, would ensure Oil Search’s long-term survival
“The painful decisions we have taken to optimize our organizational structure, enhance efficiencies and reduce operating costs have not been made lightly. They are the result of extensive studies aimed at ensuring we have an organizational structure that not only makes us more resilient to oil and gas price fluctuations but also embeds a culture of continuous improvement, operational excellence and strict fiscal discipline.”
Oil Search has lowered its production cost guidance for 2020 to around $10.50 per barrel of oil equivalent before one-off restructuring costs, down from its previous guidance of $11-12 per boe. (The company said in May that it planned to reduce production costs to approximately $9.50-10.50 per boe through capital expenditure cuts at its operations in Papua New Guinea and in Alaska.)
In his July 1 update Wulff said, “good progress is being made to reduce the breakeven cost of the Pikka unit development.”
- KAY CASHMAN
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