Iranian write-off to affect Oil Search profits for 2011

OIL Search said last Thursday it would take a US$33.2 million impairment in its 2011 financial accounts, which will be released on Feb 21, following unsuccessful negotiations to extend the term of the Shakal Block in Kurdistan.
In a statement to the Australian Stock Exchange, Oil Search nevertheless said the company remained committed to exploration in Kurdistan, located in northern Iraq, where there is considerable industry interest and competition for acreage.
Oil Search managing director Peter Botten said the impairment charge would be recorded as a significant item with no offsetting tax benefit.
The impairment is associated with costs previously capitalised for exploration activities in the area.
The company reported on Jan 24 that last year’s revenue amounted to US$732.9 million, 25.6% higher than the previous year, but below the US$819 million recorded in 2008 after oil prices hit a record high.
Oil Search last year spent US$60.6 million on exploration, including US$9 million on exploration in the Middle East, which is non-deductible for tax purposes.
More than US$35 million was spent on exploration in the December quarter because of increased activities in PNG.
Despite the news of the write-off, Oil Search shares gained A$0.01 to close at A$6.53.