Oil Search Profit Rises as Higher Prices Offset Output Drop

   By Robb M. Stewart 
 

MELBOURNE, Australia--Oil Search Ltd. (OSH.AU) logged a solid increase in annual profit despite production being held back by last year's devastating earthquake in Papua New Guinea as it benefited from a jump in oil and gas prices.

Oil Search, based in the Papua New Guinea capital Port Moresby and listed in Australia, said Tuesday it anticipated output would return to pre-earthquake levels in the new year and production costs would be cut by as much as 20%, though overall spending is set to rise as it pushes ahead on liquefied natural gas and oil developments.

Net profit rose by 13% to US$341.2 million in 2018 from US$302.1 million the year before.

The company's production of oil and gas declined by 17% last year to 25.2 million barrels of oil equivalent, dented by the earthquake and a series of aftershocks in Papua New Guinea's Highlands region. The fall came despite a strong rebound for the PNG LNG venture, which produced at its highest-ever half-year rate at an annualized 8.8 million metric tons in the second half of the year.

Offsetting the hit to production, stronger liquefied natural gas and oil prices helped lift revenue for the year 6.2% to US$1.54 billion. The average price Oil Search received for its LNG and has was 31% higher than in 2017, while the average oil and condensate price was 27% higher.

The company operates all of Papua New Guinea's oil fields and has a 29% interest in the PNG LNG gas-export venture operated by Exxon Mobil Corp. (XOM) that came on stream in 2014. It also has stakes in large undeveloped gas fields in Papua New Guinea operated by France's Total SA (TOT) that together with the PNG LNG project's reserves could underpin 8 million tons a year in additional LNG capacity in the country.

Additionally, Oil Search has sought to reduce its reliance on Papua New Guinea and gas exports, buying into oil fields it is developing in Alaska's North Slope.

Managing Director Peter Botten said the company's growth projects have the potential to double production by the mid-2020s.

Oil Search said it would pay a final dividend of 8.5 U.S. cents a share, bring the full-year payout to 10.5 cents against 9.5 cents the year before.

Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

February 18, 2019 18:30 ET (23:30 GMT)

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