Oil Search ups H1 profit

OIL Search yesterday reported a profit after tax of US$107.5 million for the six months to June 30, compared with US$114.5 million in the same period last year.
Sales revenue increased by 7% due to higher gas sales and rig income, underwritten by continued strong oil production and a healthy oil price, with the 6% fall in profitability largely reflecting an increase in expensed exploration costs.
“Operating cash flow for the first six months was US$198.3 million, which was used to fund Oil Search’s active exploration and development drilling programme,” the report said.
“PNG LNG project expenditures were funded from cash and by drawdowns from the PNG LNG project finance facility.
“During the first half of the year, continued progress was made on the construction of the PNG LNG project, operated by Esso Highlands Ltd, an affiliate of ExxonMobil Corporation.
“Milestones included the installation of several of the key items of LNG train equipment, including the train 1 main cryogenic heat exchanger, and the completion of the offshore pipeline.
“The US$15.7 billion project remains on track for first LNG sales in 2014.”
The report said:

n A key highlight for the period was the discovery of a substantial gas accumulation at P’nyang South. 
With resource evaluation and preliminary analysis of development options now underway, Oil Search believes the P’nyang field could provide a key underpinning volume for LNG expansion;

n The company has embarked on one of the largest drilling programmes in its long history, with the objective of finding oil and gas resources to underwrite further growth beyond the present two train PNG LNG development.
P’nyang South was the first well in this programme, with two high potential wells currently being drilled. 
Trapia 1, an exploration well in the PNG Highlands, is targeting a gas structure east of the Hides and Angore gas fields, while Taza-1, located in the Kurdistan region of Iraq, is drilling a substantial oil prospect. Success in either well could have a significant impact on Oil Search’s value;

n The exploration programme will continue over the rest this yearand into next year, with Mananda 6 in the Highlands, the Gulf of Papua offshore programme and the Semda-1 well in Tunisia;

n Oil Search’s balance sheet remains very solid.
At  the end of June, the company had a cash balance of US$852.7 million while US$2,349.2 million had been drawn down under the PNG LNG project finance facility.
The company’s revolving credit facility, totalling US$217.5 million at the end of June, remained undrawn; and

n Significant progress has been made in refinancing the company’s existing corporate debt facility, with strong support received from a range of domestic and international banks.
Committed offers have been received in excess of US$500 million and the facility is expected to be finalised shortly. 
The new facility will provide additional funding flexibility with a term beyond the commencement of cash flows from the PNG LNG project.

n The board has approved the payment of an unfranked interim dividend for this year of US$0.02 per ordinary share, payable on or around Oct 8, 2012. 
The dividend payment will be funded by the company’s fully underwritten dividend reinvestment plan.