Productivity vs cost cutting

Resources Corner

The energy sector has this week been dominated by production reports with Oil Search showing record output in the June quarter, Beach Energy and AWE both posted lower production figures and Senex has managed to meet its target. 
 
In the uranium space Paladin has followed many other energy companies by cutting costs, the difference is that staff have agreed to take pay cuts of 10 per cent and the MD will trim his pay by 20 per cent. The move has its hopes pegged on a rebound in energy prices coming soon.
 
Production numbers…
 
Oil Search Limited (ASX:OSH) has achieved record production in the June quarter and lifted its output guidance for the full calendar year. The oil and gas producer increased quarterly production by 7 per cent to 7.41 million barrels of oil equivalent in the second quarter.  
 
Senex Energy Limited (ASX:SXY) has met its output target for the full 2015 financial year. The oil and gas group reported annual production increased 1 per cent to 1.39 million barrels of oil equivalent (mmboe), inline with guidance of between 1.36 mmboe and 1.41 mmboe. 
 
Beach Energy Limited (ASX:BPT) has lowered its capex and flagged a fall in oil production but higher gas sales volumes for the year ahead.
 
AWE Limited (ASX:AWE) has posted an annual output drop but confirmed its on track to almost double output by 2018.
 
Cost cutting
 
Shares in Paladin Energy Limited (ASX:PDN) rose almost 10 per cent in a session after reporting it was cutting its business costs to reduce total cash costs by more than $US33 million.  As part of the 35 per cent reduction in corporate costs the miner’s management and staff will take a 10 per cent salary cut and Managing Director John Borshoff will take a 20 per cent cut. Prior to the announcement the salary of the Managing Director had been reduced by 35 per cent and board fees reduced by 10 per cent. Paladin Energy says it still firmly believes the uranium market is near an inflection point, after which materially higher prices are expected.
 
Doing deals
 
Liquefied Natural Gas Limited (ASX:LNG) has signed a binding agreement with Meridian LNG. The liquefied natural gas developer says the deal will firm capacity rights for up to 2 million tonnes per annum at its Magnolia LNG project. Magnolia will provide liquefaction services to Meridian LNG over the term of the contact in return for monthly capacity payments.