An Oil Search exploration site in PNG’s Highlands. Credit: Bob Armstrong

Oil and gas exploration and production company, Oil Search Limited, has reported a US$175.8 m profit in its preliminary annual results, a 13% fall on last year, which the company attributes  to high exploration expenses.

In a statement, Managing Director Peter Botten said exploration expenses last year were US$144m, up from US$60m in 2011.

Total revenue was US$724.6m. According to analysis from BSP Capital, this was 7.5% above a forecasted US$669m, a reflection of income from asset sales.

Botten said the PNG LNG project – in which Oil Search is a 29% shareholder – is now 75% complete, and remains on target for initial sales in 2014.

Oil Search has also farmed out its offshore acreage position in the Gulf of Papua to France’s TOTAL SA, subject to government approvals. TOTAL has extensive experience in developing major LNG projects elsewhere.

‘If the exploration is a success, they could develop an LNG project in the Gulf of Papua. Oil Search and TOTAL have also agreed to form a strategic partnership to look at other licenses in PNG, excluding the Highlands area,’ notes the BSP Capital analysis.