The impact of the February earthquake in Papua New Guinea slashed Oil Search’s interim profit, forcing it to halve its interim dividend to conserve cash.
The PNG oil and LNG group said Tuesday that its half year payout will now be two cents against the four cents a share paid a year ago.
Oil Search said net profit slumped by just on 40% after the devastating earthquake halted operations at its major project.
The company reported a net profit after tax of just $US79.2 million ($A108 million) for the first half of 2018, down 39% from $US129.1 million for the first half of 2017.
Revenues dropped by around 17% to from $US676 million to $US557 million as production levels fell by nearly a third due to the shutdown of the PNG LNG project.
The quake also caused a 14% in production costs in the half. That largely reflected remediation and other costs associated with the earthquake, net of insurance recoveries and the bringing forward of maintenance programs during the earthquake shut-down period.
There was also a 30% fall in depreciation and amortisation expense due to lower production.
The company also confirmed a 51% reduction in exploration expense, reflecting the write-off of two exploration wells in the 2017 half year.
However, this loss was partly offset by the surge in world oil and gas prices in the half (as was apparent when the June quarter production report was released last month. The oil price was up 34% and LNG and gas prices 18% higher because of strong buying by China in the half, which continues.
“Oil Search’s financial performance for the first half of 2018 reflected the impact of the 7.5 magnitude earthquake, which struck the PNG highlands in late February 2018 and resulted in the temporary shut-in of all Oil Search operated production and the PNG LNG project,” Oil Search CEO Peter Botten said in yesterday’s statement.
He said the company sees a much stronger second half as all its PNG operations are back online, “with PNG LNG presently operating above pre-earthquake levels.” The company has upgraded second half production forecasts.
