By Robb M. Stewart
MELBOURNE, Australia--Oil Search Ltd.'s (OSH.AU) half-year net profit more than doubled as oil and gas operations in Papua New Guinea recovered from a big earthquake last year, supporting a lift to the energy company's interim dividend.
The strong result comes as Oil Search prepares to begin engineering work on a prospective oil field in Alaska, and it along with partners including France's Total SA and Exxon Mobil explore the next steps on projects to double liquefied natural gas output in Papua New Guinea.
The company, based in Papua New Guinea's capital of Port Moresby and listed on the Australian exchange, on Tuesday said its net profit jumped to US$161.9 million in the first half of 2019 from US$79.2 million a year earlier.
Production for the six months was 38% higher at 14.1 million barrels of oil equivalent, after being held back in 2018 by the severe earthquake and aftershocks in Papua New Guinea's Highlands region. Total revenue for the period was up 39% to US$776.9 million from US$557.8 million a year earlier.
The company plans to pay an interim dividend of US$0.05 a share, more than double the A$0.02 it paid a year earlier.
Established in 1929, Oil Search operates all of Papua New Guinea's producing oil fields and has interests in several big natural-gas fields on the island as well as a 29% interest in the Exxon-led PNG LNG project that exports liquefied natural gas to Asia. Additionally, it has a stake in Total's Papua LNG project.
Oil Search's shares have been under pressure in recent months and are down almost 10% in 2019 on investor worries that the LNG expansion in Papua New Guinea will be derailed by a change in government. The nation's petroleum minister, Kerenga Kua, last week confirmed the new government would renegotiate a gas deal for the Papua LNG project agreed by Total and the previous government in April. A state negotiating team left for Singapore on Thursday to discuss the agreement, and Mr. Kua cautioned they "could work out well or even disastrously."
The Papua LNG gas agreement signed in April included a new 2% production levy and domestic-market obligation for gas at a fixed price.
On Tuesday, Oil Search's Managing Director Peter Botten said that while the company respected the right of any host government to review the project agreement, the project partners believed the existing terms and deal were entered in good faith and were appropriate, fair and reasonable.
Mr. Botten said the companies were seeking a resolution with Papua New Guinea's government by end-August.
In an effort to diversify beyond Papua New Guinea and LNG, Oil Search in late June doubled its stake in prospective oil fields in Alaska, where it and partner Repsol plan to build an operation producing about 120,000 barrels a day. It made its foray into Alaska's North Slope in late 2017 with a deal to buy into three exploration blocks that included the Nanushuk oil field sandwiched between two established fields controlled by ConocoPhillips.
Mr. Botten said the company expected to enter the engineering and design phase for a key part of the Alaskan assets in the final quarter of 2019 and to make a final investment decision in mid-2020.
Write to Robb M. Stewart at firstname.lastname@example.org