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. Last Updated: 07/27/2016

Chevron Sells New Guinea Oil Assets

MELBOURNE, Australia -- Oil Search Ltd. agreed Monday to buy ChevronTexaco Corp.'s Papua New Guinea assets for $96.6 million in a deal that will boost the Australian oil and gas producer's output 20 percent and lift earnings per share by a third.

The purchase increases Oil Search's share in the Kutubu, Moran, Southeast Gobe and Main Gobe fields and is expected to raise the company's forecast 2004 and 2005 production to between 11.0 million and 11.8 million barrels from between 9.2 million and 9.8 million.

Oil Search said it would fund the purchase from existing cash reserves and new debt.

In May, Oil Search took over from ChevronTexaco as operator of the fields after the U.S. energy company said it would sell its Papua New Guinea oil and gas interests and focus on faster growing assets. The fields it is selling produce around 53,000 barrels of oil per day.

"Clearly if you are a joint venture partner you are a logical buyer," ABN Amro analyst Paul Ashby said.

Oil Search said the purchase would boost earnings per share by 6 percent this year, 33 percent in 2004 and 37 percent in 2005, while cash flow per share would rise 2 percent this year, 23 percent next year and 28 percent in 2005.

"The acquisition will immediately deliver material positive results to the company, adding reserves and production at a very competitive price," Oil Search managing director Peter Botten said in a statement.

Oil Search shares were steady at 86 Australian cents ($0.55) in a slightly firmer overall market in midafternoon trade.

Oil Search said the ChevronTexaco assets held reserves of 18.45 million barrels at the end of 2002.

The company is planning to cut the fields' operating and drilling costs, extend their life and continue an exploration and development program.

Oil Search said it would consider selling on some of the interests after the value of the assets had been optimized.

The purchase raises Oil Search's stake in the Kutubu and Moran fields to 72 percent from 53 percent previously, while in Gobe Main its equity rises to 76 percent from 57 percent and in South East Gobe its stake rises to 53 percent from 45 percent.

The purchase also increases Oil Search's holdings in the SE Mananda, Saunders and Paua discoveries, exploration license and two petroleum retention licenses covering the Juha and P'nyang gas fields.

ChevronTexaco also held two pipeline licenses for the export of crude oil, which will also go to Oil Search.

The purchase is effective from April 30, 2003, and completion is expected by Oct. 31, 2003.