October 21, 2019 / 11:32 PM / a month ago

UPDATE 2-Oil Search cuts 2019 production outlook, slashes capex on project delays

* Quarterly output, revenue fall on mooring system damage

* Company says system repaired, normal loading resumed

* Hopes to sign P’nyang gas agreement before year-end (Adds PNG pact details, company official’s quote; paragraphs 4-7)

Oct 22 (Reuters) - Australia-listed Oil Search Ltd on Tuesday posted a 24% drop in quarterly revenue and cut its 2019 production guidance after damage to a mooring system dented output.

The company also reduced 2019 capital spending by about 15%, due to delays in securing agreements with the Papua New Guinea government so preliminary engineering work can begin on a $13 billion plan to double the country’s LNG exports.

Papua New Guinea’s biggest company restricted output in August after damage to the mooring system at a facility in the Gulf of Papua.

For the three months to Sept. 30, production slipped 10% to 6.81 million barrels of oil equivalent (mmboe) - its lowest September quarter output since 2014.

Quarterly revenue fell to $361.1 million from $474.9 million last year, which the company blamed on lower sales and weaker liquefied natural gas (LNG) and oil prices.

Both figures missed UBS estimates. The brokerage had estimated output at 7.4 mmboe, while sales revenue was expected at $379 million.

The oil and gas explorer said it now expects 2019 full year production of 27-29 million barrels of oil equivalent (mmboe), from an earlier forecast of 28-31 mmboe.

Repairs to the damaged mooring chain had been completed successfully in mid-October and normal loading operations have now resumed, it said, with production ramping up.

The cut in capital spending comes as Oil Search gears up for the next leg of development with its partners through the Papua LNG project, led by Total SA, and an expansion of PNG LNG, led by Exxon Mobil Corp.

The Papua LNG project was sanctioned by the government in September, relieving uncertainty stemming from new prime minister James Marape’s agenda for the country to reap more from its resources sector.

However Exxon now needs to reach an agreement with the government for the development of the P’nyang gas field before the companies can begin engineering design work for the PNG LNG expansion.

“Discussions ... on the P’nyang Gas Agreement recommenced late in the third quarter, with the agreement targeted to be signed before year end,” Managing Director Peter Botten said in a statement.

The partners had hoped to begin preliminary work before the end of this year, aiming to make a final investment decision on the project in 2020.

Reporting by Rashmi Ashok and Devika Syamnath in Bengaluru; Editing by Richard Pullin

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