Big sales don't distract Oil Search

OIL Search maintained its focus on pushing ahead with the Papua New Guinea-to-Australia gas pipeline as it reported record half-year sales of $US315 million ($417 million) thanks to high oil prices.
In its June quarterly report, the company said it was seeking to raise about $US750 million in debt to fund its share of the $US2.5 billion upstream portion of the PNG pipeline.
"The financing memorandum for the project was released to potential lenders and the initial feedback from them demonstrates a strong interest in providing highly competitive funding for the project," Oil Search managing director Peter Botten said.
At this point, the company is debt-free and has $US524.4 million in cash.
The PNG pipeline is expected to win final development approval by the end of the year but it first needs to convert provisional sales contracts into binding purchase agreements with big Australian energy users. AGL, a participant in the upstream and downstream portions of the massive project, is the only customer to have signed a firm purchase agreement.
The upstream portion of the PNG pipeline is to be operated by US oil giant ExxonMobil but Santos remains in discussions to re-enter the project through its interest in the Hides gas field in PNG.
Oil Search reported record sales revenue but lower production from its oil and gas fields in PNG during the first half of the year. The production decline was mainly due to the sale of some of its oil interests to AGL but a small fire at a pumping station and weather-related cargo loading issues also affected the company.
Compared with the first half last year, production fell 4 per cent to 5.3 million barrels of oil equivalent. But Oil Search said its full-year production should remain within its original guidance of 11 million to 11.5 million boe.
"The outlook for the second half of 2006 is strong," Mr Botten said. The company received a record average price of $US74.26 a barrel for its oil in the last quarter and remains unhedged.
Oil Search shares closed 7c higher at $4.21 yesterday.