Australia’s third-largest pure oil and gas producer Oil Search says its $2 billion expansion plans in Papua New Guinea (PNG) are on track following a year marked by political instability.
Oil Search maintained its full year production target but it was not enough to prevent the company’s shares finishing slightly lower on Tuesday.
Managing director Peter Botten said production was going well, despite the shutdown of a loading facility in Papua New Guinea (PNG).
“We remain on track across a range of prospects and I’d be surprised if there weren’t too many oil and gas companies that have got much positive medium-term growth opportunities,” Mr Botten told analysts on Tuesday.
“Underpinning it all is the delivery of PNG LNG (liquefied natural gas) in a predicable way.”
While there had been some political instability in PNG over the past 12 months, Oil Search was pleased that recent national elections had no impact on the company’s operations.
It expects to spend about $US2 billion ($A1.92 billion) on PNG LNG exploration and development in 2012.
Over time the PNG LNG project would more than double the country’s GDP.
At the close of trade on Tuesday Oil Search shares were three cents, or 0.42 per cent, lower at $7.16 after the company posted a net profit of $US107.5 million ($A103.34 million) for the six months to June 30, down six per cent from $114.5 million in the previous corresponding period.
Higher exploration costs were the main reason for the drop in profit, with production down slightly from the previous first half, but sales revenue higher.
The company suspended operations at its Kumul Marine Terminal in PNG, after a minor oil spill during the loading of an oil tanker in July which affected production.
Mr Botten added that the company’s plans to sell down a stake of the Gulf of Papua project were progressing, and an announcement would be made in around next month.
Over the next 12 to 18 months Oil Search will conduct a review into how to reward shareholders through both capital growth and returns as the company grew rapidly.
Oil Search has around $850 million in cash as it refinances its corporate debt facility as offers were received for more than $US500 million ($A480.65 million).
Oil Search declared an interim dividend of two US cents per share, in line with the previous year’s interim dividend.
Patersons analyst Alexis Clark said despite the recent halt to production, the company had managed to maintain its guidance and its PNG project remained on track.
“The company’s targets are mostly in line with consensus estimates,” Mr Clark said.
