Oil Search first-half profit dives 85% as pandemic batters oil prices

Australia-listed Oil Search Ltd reported an 85% plunge in half-year core profit on Tuesday, hurt by a slump in oil and gas prices as the coronavirus outbreak hammered economic activity worldwide.

In a bid to weather the oil price crash, the Papua New Guinea-focused oil and gas explorer earlier this year axed a third of its workforce, raised cash in a share sale, and deferred key growth projects in Alaska and PNG as the entire sector struggled.

For the six months ended June 30, average realised oil and condensate prices dropped 45% to $35.91 a barrel, while average realised LNG and gas prices fell 15% to $8.22 per million British Thermal Units.

Oil Search said PNG LNG operator Exxon Mobil Corp has resumed talks with the PNG government on terms for developing the P'nyang gas field, key to a joint $13 billion plan by Exxon and France's Total to double LNG exports from Papua New Guinea.

The company said that due to Covid-19 it expects demand for material new LNG supplies in the Asian region "will be delayed by a few years compared to pre-Covid-19 estimates."

Talks on the P'nyang agreement were put on hold in January. Delays on reaching an agreement and the Covid-19 oil slump have delayed final investment decisions on the twinned LNG projects. Oil Search had previously hoped for first production on the expansion in 2024.

Looking to shore up its operations and growth projects, the company has focused on cutting costs. For 2020, it expects unit production cost guidance of $9.50 to $10.50 a barrel of oil equivalent (boe), down from $10 to $11 per boe earlier.

Core profit after tax dived to $24.7 million for the period, from $165.2 million a year earlier, far short of a broker consensus forecast of $61 million.

The company scrapped its interim dividend and reported a net loss of $266 million, down from a profit of $161.9 million a year earlier, hurt by the write-down of its PNG exploration assets.