As forecast, Oil Search (OSH) reported a 49% jump in first-half net profit to a record $US227.5 million, as a full half year’s share of production from the Papua New Guinea liquefied natural gas project more than offset plunging global oil, and gas prices.
Sales climbed 69% for the six months, which was also not unexpected.
Oil Search declared a dividend of US6c per share, three times the first half payout for 2014 when the company was seeing the PNG LNG project build up output.
Chief executive Peter Botten repeated previous comments that Oil Search was targeting operating and capital unit cost reductions of up to 20% from 2016 onwards.
“While there are varying views in the market on how long lower prices will prevail, we continue to believe it is prudent to plan for an extended period of oil prices at or around current levels,” he said yesterday.
Mr Botten said Oil Search is aiming to cut $US2.50-$US3.50 per barrel from the costs of its operated oil and gas production, which was just under $US16 per barrel of oil equivalent in the first half.
He said cost reductions of between 10-25% are coming through after negotiations with major suppliers, with more to come in the second half.
The efficiency measures would make Oil Search a "much leaner and more efficient organisation," Mr Botten said.
In its June half year production report, Oil Search last month said production was almost three times higher than a year earlier, at 14.3 million barrels of oil equivalent, prompting it to lift its target for the year.
It said production costs had fallen by 43% to US$8.90 a barrel, after some work was deferred until the second half of 2015.
The company’s main asset is a 29% stake in the PNG LNG operated by ExxonMobil. It started production in April 2014
Oil Search says it expects to produce between 27 million and 29 million barrels of oil equivalent for the full year.
Oil Search shares ended at $5.90, up 1.5%.
