reuters article

UPDATE - Orogen merger boosts Oil Search2002 profit
Tuesday March 4, 10:39 pm ET
By Michelle Nichols


(Adds detail throughout)
MELBOURNE, March 5 (Reuters) - Australian-listed Papua New Guinea oil and gas producer Oil Search Ltd said on Wednesday it had more than tripled 2002 net profit due to a merger with Orogen Minerals and expected production to grow in 2003/2004.

ADVERTISEMENT


The company said the result reflected an expanded asset base following the merger with Papua New Guinea-based Orogen Minerals in April 2002 and was driven by a strong production performance and higher oil and gold prices.

"Based on continuing strong commodity prices, this should translate to continued growth in profits over this period," Oil Search Chairman Trevor Kennedy said in a statement, referring to the 2003/2004 period.

Oil Search also unveiled plans for an on-market buyback of up to 10 percent of its shares during the next 12 months, funded mainly by surplus cash and strong cashflows generated by production operations and the possible sale of mineral assets.

The company reported a net profit of A$87.2 million ($53.2 million) for calendar 2002, compared with A$23.7 million for 2001. A final dividend of US$0.01 per share was declared.

Oil Search shares, which have halved during the past 12 months over concerns for a key pipeline project, last traded up 1.5 percent to A$0.70, while the benchmark index (Australia:^AXJO - News) shed about one percent.

The result exceeded analyst expectations, which averaged A$85.1 million according to Multex Global Estimates, within a wide range of A$62.6 million and A$118.9 million.

Oil Search Managing Director Peter Botten told a media and analyst briefing that oil and gas production was expected to grow 10 to 15 percent during 2003. The company's production for 2002 totalled 8.31 million barrels of oil equivalent (boe).

GAS COMMERCIALISATION THE KEY

Oil Search holds oil and gas interests in Papua New Guinea (PNG) and has a 37 percent interest in a $3.5 billion PNG-to-Australia gas pipeline project, which it has described as a company-making project.

However, the ExxonMobil (NYSE:XOM - News)-led venture has been struggling to sign up enough customers to underpin the construction of the 3,200 km (2,000 mile) pipeline, which has been on the drawing board for more than six years.

"It is our core business in 2003 to develop our gas, and clearly we do see there is a number of smaller options we will chase should the pipeline stall or progress not be satisfactory," Botten told the briefing.

The pipeline development has won contracts to supply up to 75 petajoules of gas annually, but the joint venture said it needed commitments for at least 100 petajoules of gas annually before the project could enter the early engineering and design phase.

"The critical thing for Oil Search has always been commercialising its gas resource," Auzeq Securities analyst Andrew Williams said.

"It is demonstrating that there is a will to get this gas to market in one form or another or have a project that's going to utilise this resource and that's all got to be positive."

Other shareholders in the project are ChevronTexaco (NYSE:CVX - News), Japan PNG Petroleum and PNG's Mineral Resources Development Company representing landowners interests.