Oil Search posted a surprise annual core profit on Feb. 23 as the Papua New Guinea-focused oil and gas producer aggressively cut costs to overcome a coronavirus-induced price slump.
The price collapse forced the company to cut jobs, raise cash and write off the value of some exploration assets, which helped it avert a loss and pay a small dividend of 0.5 cent a share.
“Whilst modest, it reflects an increasing confidence in our business and the demand outlook going forward,” Managing Director Keiran Wulff told analysts.
Its battered shares rose as much as 9% on the better-than-expected result and a jump in oil prices overnight.
Oil Search’s main challenge this year is to sell a 15% stake in its $3 billion Pikka oil project in Alaska, where it has shifted its focus as its growth projects in Papua New Guinea (PNG) have been delayed.
It is developing Pikka with Spain’s Repsol, targeting a final investment decision in late 2021. They aim to start production in 2025 at 80,000 barrels per day.
Oil Search and Repsol will start a formal sale process in April after sounding out companies which have already expressed interest in the project, Wulff said. Repsol is looking to sell a 14% stake.
Wulff is confident there will be bidders willing to work in the Arctic—a region shunned by some companies due to environmental concerns—as it is a conventional oil project with good growth potential.
“It’s almost binary—you’re either interested in the Arctic or you’re not. And those that are, are now seriously looking at the quality of this project going forward,” Wulff said.
He did not rule out selling a stake in its PNG assets to help fund the Alaskan project.
Oil Search’s core net profit after tax in 2020 fell to $22.0 million from $320.9 million a year earlier. Analysts had expected a core loss of $24.7 million, according to Refinitiv IBES.