Like its larger rival, Woodside a week ago, Oil Search has ridden the improved performance of oil and LNG prices in the six months to June
Off a higher base, Woodside boosted its net profit 49% (and cut costs). Oil Search’s increase was a far more impressive rise to $US129.1 million from $US25.6 million in the six months to June 30, 2016.
As a result the Papua New Guinea oil and gas producer will pay a US4 cents a share dividend, up from US1 cent a year ago, which was above some market forecasts.
The six months to June last year represented the toughest time for the resources sector (as evidence by all companies, large and small reporting losses, write downs, lower revenue and tiny profits (it at all). Dividends were slashed to conserve cash and the outlook was gloomy.
A year latter, with higher prices and better global demand (thanks to China) the sector has roared back (although it must be said the optimism about the outlook for global oil prices for the rest of the year and into 2018 have been wounded back in the past month).
Oil Search was no different in reporting higher sales revenues and lower costs for the June half year.
Veteran CEO, Peter Botten said efforts to improve cost and operational performance drove the improved result, helped by record production rates at the ExxonMobil-operated PNG LNG venture which saw Oil Search reveal an upgrade in forecast output in the second half.
Oil Search has lifted the lower end of its production guidance for 2017 to 29 million barrels of oil equivalent, with the upper end unchanged at 30.5 million boe.
The outperformance of PNG LNG has allowed the venture to market extra LNG to customers under long-term sales contracts, and Oil Search said the effort has attracted “strong” interest, with sales terms expected to be agreed by the year end.
Mr Botten said Oil Search had downgraded its forecasts for crude oil prices (Santos and Origin Energy also cut their forecasts), in line with market expectations, but that no write-downs on asset values were required (unlike Santos and Origin Energy).
