PDO generates cash flow ‘windfall’ of $14.5 billion in 2021

Ambitious goals: 2022 cash flow targeted at $8.9 billion, says MD Steve Phimister

MUSCAT, SEPT 18

Buoyant international energy prices helped boost cash flow from Petroleum Development Oman’s (PDO) Oil & Gas operations to $14.5 billion in 2021, delivering a “significant windfall for the nation”, according to Steve Phimister, Managing Director (pictured).

This compares with an original target of $10.5 billion, he stated in the majority government-owned energy company’s 2021 Sustainability Report.

Helping deliver this impressive figure is a combined oil, gas and condensate production averaging 1.223 million barrels of oil equivalent per day (boepd) in 2021. It included oil production averaging 635,000 bpd (5,000 bpd short of target), annual gas production of 57 million cubic metres per day (against a target of 71 million m3/day) and condensate output that was slightly under the target of 104,000 bpd – overall figures that were achieved “despite the coronavirus constraints on the mobility and availability of personnel and pressures on our supply chain”, the Managing Director noted.

In comparison, oil production is targeted at 652,000 bpd and condensates at 91,000 bpd in 2022, with Capex and Opex for the year projected at $5.129 billion and $2.066 billion respectively. “This should generate $8.9 billion cashflow for our shareholders (based on an oil price of $45 a barrel and of $4.5 per million British thermal units of gas),” Phimister stated.

In another successful year on the exploration front, PDO booked a total of 111 million barrels of oil and 0.6 trillion cubic feet of gas as commercial contingent resource (CCR) volumes in 2021. The overall unit finding cost was just $1.36 per barrel of oil (boe) equivalent, according to the report.

The company also notched significant gains in reining in expenditure in line with its rigorous cost management regime, the Managing Director said. “We made more than $550 million in total savings (a rise of more than 10 per cent on 2020) across all directorates and different contracts, especially those related to rates, demands and specifications. This was mainly attributable to our Near-Term Sustainability programme (NTSP), which addresses a step change in structural cost reductions and productivity improvements on a far greater scale than achieved throughout our history. The Programme achieved its mandate to deliver $1 billion cost savings in 2020-21, guided by multi-disciplinary teams for each spending portfolio. These were tasked with carrying out deep-dive investigations, contract reviews and negotiations to deliver optimal value.”

A mix of NTSP revisions, drilling efficiencies, well optimisation and project savings delivered oil-related Capex savings of $327 million and gas Capex savings of $90 million, he further added.

Going forward, the company’s future direction will be guided by the following three strategic priorities: (1) growing safe and cost/carbon competitive hydrocarbon operations, (2) establishing a differentiated hydrocarbon portfolio and (3) developing carbon capture, usage and storage and low-carbon fuels, Phimister added.