Oil and gas producer Oil Search says its first half profit is up six per cent, but production had fallen marginally and is likely to remain flat in the next six months.

Oil Search also expects overall operating costs to continue to rise in the second half.

The company on Tuesday posted a net profit of $US113.5 million ($A125.23 million) in the six months to June 30, up from $US107.5 million in the previous corresponding period.

But revenue was $US381 million, down four per cent from $US398.5 million.

Oil production fell two per cent to 3.19 million barrels of oil or equivalent (mmboe), from 3.26 mmboe.

“Production is forecast to remain broadly flat over the second half of 2013,” the company said in a statement.

That was due in part to the continued decline in the Kutubu and Moran fields in PNG.

Meanwhile, the company’s PNG LNG project, operated by Esso Highlands Limited, was making excellent progress.

Managing director Peter Botten said it should come on line soon.

“We are now at the 90 per cent completion mark and soon expect to start delivering gas from the oil fields to the LNG plant to support commissioning,” Mr Botten said.

But, the company said, overall total cash operating costs had risen 14 per cent to $US101 million in the 2013 first half, from $US88.4 million in the same period the previous year.

And while total oil and gas sales volumes for the first half were 3.37 mmboe, which was similar to the previous corresponding period, prices were lower.

Oil Search’s average oil price of $US108.58 per barrel in the first half of 2013 was six per cent down on the price in the first half of 2012, reflecting lower global oil prices.

Production guidance for the 2013 full year is unchanged at between 6.2 and 6.7 mmboe, while operating costs are expected to fall within guidance of $US24-$US26 per boe.

The company’s interim dividend of two cents is the same as the previous first half.

Oil Search shares were up 15 cents, or 1.8 per cent, at $8.40 at 1207 AEST.