Oil Search: Net Profit Up, PNG LNG Employs 14,300 Workers

Oil Search of Papua New Guinea said today that it has lifted its full year net profit by 9% to US$202.5 million.

The profit increase reflected a 45% rise in the average realised oil price, which more than offset 10.6% lower sales volumes. NPAT excluding significant items rose 64%, from US$144.1 million to US$235.7 million, the company said.

Highlights

• During 2011, good progress was made on all aspects of the PNG LNG Project, which is now two years into a four year construction schedule. In early December, the Operator, Esso Highlands Limited, a subsidiary of Exxon Mobil Corporation, confirmed that the Project remains on track to achieve first LNG sales in 2014.

• Preparations were made during the year for the largest drilling programme in the Company’s history. This campaign is targeting significant gas and oil reserves, which have the potential to underwrite further LNG growth and continued strength in oil production. Drilling is now underway and will extend for the next 18 months.

• 2011 total oil and gas production was 6.69 mmboe, 12.7% lower than in 2010 but at the upper end of the Company’s guidance range. This reflected a continued strong operational performance from the Company’s mature oil fields, with successful well optimisation and drilling substantially mitigating the impact of natural field decline and the planned facilities shutdown for PNG LNG Project-related construction work.

• Oil Search continues to have a strong balance sheet and is well placed to fund significant investment in the PNG LNG Project, as well as further growth initiatives. At the end of December 2011, the Company had cash reserves of US$1,047.5 million (including its share of joint venture balances) and an undrawn revolving oil facility of US$246.5 million, taking total liquidity to US$1,294.0 million. The net debt position at the end of the year, including PNG LNG project finance draw-downs, was US$700.1 million.

• The Board has approved the payment of a final dividend of two US cents per share for the 2011 financial year, payable on 10 April 2012. Together with the interim dividend of two US cents per share, paid to shareholders in October 2011, the total dividend for the year is four US cents per share, the same as in 2010. The dividend payment will be funded by a fully underwritten dividend reinvestment plan.

• 2012 will be a year of major investment by Oil Search in PNG. The Company will spend an estimated US$2.2 billion in-country, on PNG LNG Project-related activities and on an extensive gas and oil exploration, appraisal and development programme. This is likely to make Oil Search the largest single investor in PNG this year, attesting to the Company’s confidence in the Government and continued operating stability in the country, as well as its ability to manage in-country challenges, including the forthcoming election. Oil Search will continue to work closely with Government, bureaucracy and local communities to ensure the safety of its people and stability of the operating environment.

PNG LNG Project

Oil Search said that PNG LNG Project activities ramped up significantly during the year, as early works and infrastructure development progressively reached completion and full scale construction commenced.

By the end of 2011, more than 14,300 people were employed on Project activities, of which 60% were PNG citizens. In line with the Project’s commitment to provide opportunities to PNG women, more than 1,000 people in the workforce were females, 94% from PNG.

Project activities in 2011 were focused on the following areas:

• LNG Plant: Commencement of construction of foundations, structural steelwork, pipe racks, jetty works and tank foundations, with work starting on the outer LNG tank shells towards the end of the year.

• Offshore Pipeline: Commencement of laying the offshore pipeline, including clearing of the landfall site at the LNG Plant site (Caution Bay), trenching, shore pull and trench backfilling. 130 kilometres of the 400 kilometre offshore pipeline had been laid by the end of the year.

• Onshore Pipeline: Continued procurement, coating and mobilisation of line pipe, with all line pipe received in PNG by year end. Route clearance and pipe laying continued, with over 100 kilometres of the onshore pipeline welded in 2011 and a number of sections trenched and complete. Pre-construction surveys for the entire 292 kilometre onshore pipeline route were completed.

• Associated Gas and PL 2 Life Extension Projects: Successful completion of the first phase of tie-ins and major equipment installation at the Kutubu Central Processing Facility (CPF) and the construction of a new control room at the CPF. Laying of a new subsea loading pipeline and the installation of a new Catenary Anchor Leg Mooring (CALM) buoy.

• Hides Gas Conditioning Plant (HGCP) and Komo Airfield: Continued earthworks, foundations and commencement of construction activity, including the commencement of piling work at the HGCP.

• Drilling: Mobilisation of the first of two new drilling rigs to PNG.

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LNG World News Staff, February 21, 2012; Image: Santos