Oil Search posts K435mil profit

By BOSORINA ROBBY
OIL SEARCH Ltd posted a net profit of US$202.5 million (K435 million) on the back of higher oil prices and lower exploration expense during the financial year 2011.
Managing director Peter Botten, who launched the report in Sydney yesterday said this was a 9% increase from the 2010 net profit of US$185.6 million (K383.46 million).
He said it more than offset the decline in oil sales volumes, ongoing cost pressures in Papua New Guinea and the impact of the strengthening kina and the Australian dollar.
“Production in 2011 was at the upper end of our expectations, at 6.69 mmboe, even though it was lower than in 2010,” Botten said.
“Pleasingly however, the company has considerable success in slowing the decline from our mature PNG oil fields, through well work and a programme of infill and exploration/appraisal drilling.
“Four wells were drilled in the Kutubu complex fields during the year, all of which were successful,” he said.
Operating costs rose 18.9% over 2010 levels, due to a range of factors.
“Localised inflationary pressures in PNG and the strength of the kina increased costs, while the strengthening of the Australian dollar relative to the US dollar during the year put pressure on the Company’s Australian dollar denominated expenditures,” he said.
Exploration expenses fell from US$125 million (K258.25 million) in 2010 to US$60.6 million (K125.2 million), reflecting lower exploration and evaluation expenditures combined with an improved drilling success rate.
The write-offs primarily related to seismic work and other evaluation activities, which are expensed as incurred, in line with the successful efforts accounting policy.
He said Oil Search was expected to be PNG’s single largest investor this year, spending over US$2 billion (K4.13 billion) on development, appraisal exploration and operations.
“This is a significant vote of confidence in Papua New Guinea, and certainly the single largest investment by a PNG company,” Botten said.
“It is also a vote-of-confidence on the quality of assets and the company’s ability to work with government, bureaucrats and the community to manage the operating and investment risks in the country.”