Oil Search has delivered a threefold increase in profit and almost tripled its full year dividend amid record production and stronger oil and gas prices.
Shareholders were rewarded with a jump in the full year dividend from 3.5 US cents to 9.5 US cents full franked with the payment of a final of 5.5 US cents a share (2.5 US cents in 2016).
And yet the shares, after scooting to a day’s high of $7.75 ended down 0.5% at $7.55. That’s despite Oil Searching revealing that it and its partners in the huge PNG LNG project have moved much closer to a deal that will see production doubling in coming years.
What the company describes as core profit for the year ended December 31 rose to $US302.1 million from $US106.7 million a year ago. Oil Search said total revenue for the year rose 17% to $US1.45 billion, driven mainly by the rise in oil and gas prices.
Average realised oil and condensate price rose 24%, while average realised LNG and gas prices were 21% higher for the year, the company said. Rising demand from China for LNG played a big part in that rise.
“This more than offset slightly lower sales volumes, driving a 17 per cent increase in total revenue to $US1.45 billion,” CEO Peter Botten said in yesterday’s statement.
Despite increasing its reserves Oil Search is keeping production guidance and operating costs in 2018 around 2017 levels, but is also forecasting a rise in capital costs in the year ahead.
Exploration and production capital will almost double, from $US169.5 million to $US250 million-$US310 million as Oil Search explores its Alaskan holdings
Oil Search said it and partners ExxonMobil Corp and France’s Total SA have broadly agreed on how they want to expand the PNG LNG project using gas from new and existing fields, and are set to propose three new LNG trains with a total capacity of 8 million tonnes a year.
The expansion would double output from the PNG LNG plant.
“Oil Search has considerable discretion about when and how much to invest on other activities and will prioritise the development of its LNG expansion projects in Papua New Guinea and the Nanushuk oil field in Alaska,” Mr Botten, said.
