Oil Search First-Half Profit Jumps on Gain From Sale

By Angela Macdonald-Smith

Aug. 19 (Bloomberg) -- Oil Search Ltd., Papua New Guinea's biggest oil producer, said first-half profit increased more than fivefold, buoyed by a gain on the sale of fields in the Middle East and North Africa.

Net income rose to $264.4 million, or 23.4 cents a share, in the six months ended June 30, from $46.9 million, or 4.17 cents, a year earlier, Port Moresby-based Oil Search said today in a statement. Excluding the gain, profit almost tripled to a record $133.3 million, compared with a consensus analyst estimate of $130 million, according to JPMorgan Chase & Co.

Oil Search agreed in April to sell interests in Egypt and Yemen to Kuwait Energy Co. for $200 million to help fund its share of a $11 billion liquefied natural gas project, which will more than triple its output. A 63 percent jump in the average price Oil Search earned for its oil in the half outweighed the effect of a 9 percent drop in output after the asset sale.

``Production has stabilized after a period of weakness and is likely to be flat in a best-case scenario over the next couple of years, so it's all about continuing to progress the gas story up there,'' said Aiden Bradley, an energy analyst at ABN Amro Australia Pty in Sydney. ``The result is in line with expectations.''

Oil Search fell 16 cents, or 3.1 percent, to A$4.99 in Sydney trading, lagging behind a 2.6 percent drop in the exchange's benchmark energy index.

LNG Plans

``Production in the second half of the year is expected to be similar to first-half levels,'' Managing Director Peter Botten said in the statement, sent to the Australian stock exchange. The company reiterated a reduced full-year output forecast of 8.5 million and 9 million barrels of oil equivalent after cutting the target last month following the asset sale.

The LNG project, led by Exxon Mobil Corp., is due to start deliveries in late 2013 or early 2014 from two production units, and is in a ``very, very good position'' compared with rival ventures in the Australia and Pacific region to help meet a forecast shortage in LNG supply after 2012, said Phil Bainbridge, Oil Search's executive general manager for operations.

Oil Search is looking at a potential third LNG unit to commercialize the rest of its gas, Botten said. It will have the right to pre-empt bids for AGL Energy Ltd.'s stake in the existing project and may seek to buy other gas licenses in Papua New Guinea, he said. It may also study taking a stake in a rival LNG project in the Pacific nation, he told reporters on a conference call.

The company increased the size of a planned refinancing of its oil business to $450 million from $400 million after receiving a ``very favorable response'' from more than 15 banks.

``The pricing and other key terms offered on the new facility represent an improvement on the existing facility,'' Botten said. The debt will provide some funding for Oil Search's share of the LNG project cost, he said.

Sales advanced 53 percent to $466.7 million. Oil Search declared a first-half dividend of 4 cents a share.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net.