Oil Search has completed the bad news from the ASX’s oil and gas sector with news of an 85% slump in interim profit and no dividend for the six months to June.
The company’s interim results mirrored those from rivals like Woodside and Santos as the slump in oil and gas prices and big asset impairments hit the bottom line.
Oil Search revealed a plunge in underlying net profit to $US24 million ($A33 million) and a 266% decline in statutory profit to $US266 million ($A370 million), including one-off costs.
“The unprecedented challenges due to COVID-19, the consequent disruption to the global economy, and the precipitous decline in oil prices in the first half of 2020 have been catalysts for reassessing all areas of Oil Search’s business,” CEO Keiran Wulff said on Tuesday.
That was worse than the market forecasts, but investors took in it their stride and marked the shares up 0.6% to $3.02.
Like its rivals, Oil Search had softened up the market with a series of downgrades and updates on moves like asset write-downs and weaker revenue and earnings guidance.
For example, Oil Search last month warned of write-downs of up to $US570 million from the value of its assets and said it may have to abandon some drilling programs.
It also postponed the sale of part of a stake in an Alaskan oil prospect.
Oil Search revealed on Tuesday it would not pay an interim dividend for the six months to June. It paid 5 US cents a share in 2019. Santos though is paying a small 2.1 US cents a share to shareholders.
The company explained this move (as others have) by citing the need to preserve capital “during the current challenging market conditions and the uncertain near-term oil price outlook”.
The board said it would revisit the question of dividends at the end of the year. That would be announced in either the full year production report in early February or the 2020 results later that month.
Oil Search has laid off one-third of its workforce – cutting 550 full-time jobs – with a further 137 positions to be culled by December.
It has also slashed investment spending by $US675 million, including suspending non-essential projects and activities in Papua New Guinea and deferring planned exploratory drilling.
In Alaska, work to begin production at its Pikka oil prospect has been put on hold and the company suspended formal talks to sell off a 15% stake in its Alaskan assets.
