By ANTON HUAFOLO
HIGHER exploration costs, bloated non-cash items and higher effective tax rate pared down Oil Search profit last year by 32% to only US$140.8 million (K413.5 million).
This was on the back of record revenue totalling US$718.8 million (K2.1 billion) , up 12% on the previous year, the company said in a report reflecting the company’s performance last year.
Despite this drop in net profit in five years, the company’s share price soared A$0.10 to close at A$4.38 on the Australian Stock Exchange.
Production was down 4% but this was more than offset by a 16% increase in the oil price.
Oil Search board declared a final dividend of US$0.04 a share to take the total dividend for the year to US$0.08 a share, unchanged on the previous year.
Total oil sales last year fell to 8.7 million barrels as against 9.2 million barrels in 2006.
The company said average daily production in Papua New Guinea was only 6% lower than in 2006 which was “a good result for this mature asset set, reflecting the continued success of Oil Search’s active field management programme”.
Lower total production of 9.8 million barrels oil equivalent, down from 10.2 million barrels the previous year, was due to limited development drilling and an extended shut-in at North West Moran.
The company drilled a total of 21 exploration wells last year from where a number of successes were recorded. “However, in general, the results of the programme were disappointing,” Oil Search said.
After spending a record US$222.4 million (K653 million) on exploration, evaluation and new venture activities, the company is expected to slash spending in these areas by 35-40% to between US$130 million (K382 million) and US$140 million (K411 million) this year.
Expenditures for this year will be funded using Oil Search’s “cash position and cash flow from operations” as the company has no debts and with US$410 million (K1.2 billion) in cash.
Managing director Peter Botten said the company “is in a much better position now than in 2002” and the company’s outlook is “extremely strong”.
He added that Oil Search is looking forward to the liquefied natural gas project to enter FEED (front-end engineering and design) by the end of the present quarter, which, when happens, “will drive the value of our organisation over the next four to five years”.
There is total commitment by project partners led by operator Exxon Mobil where a big decision on FEED is expected next March. However, “the major issue is the final fiscal issue on the gas pricing agreement with the PNG Government”.
If all objectives are met in developing a petrochemical industry in Port Moresby, the first LNG sales is expected in late 2013.
The project would be the third largest LNG development anywhere in the world if developed, the company said.