Oil Search Posts Loss as Writedowns Outweigh Record Output

  • Company aims to cut capital spending by 35 percent this year
  • Output up 52% on PNG LNG; books $399 million charge on Taza

Oil Search Ltd., partner with Exxon Mobil Corp. in a $19 billion gas-export project in Papua New Guinea, reported a full-year net loss and slashed spending plans as writedowns on its assets in Kurdistan overwhelmed record production.

The Port Moresby-based company posted a $39.4 million loss, compared with a profit of $353.2 million a year earlier, as it took a $399.3 million charge on its Taza assets in Kurdistan, it said Tuesday. Excluding one-time items, profit fell to $359.9 million from $482.8 million. The company expects to cut spending this year by 35 percent, it said.

“The increase in production was offset by significantly lower global oil and gas prices,” Managing Director Peter Botten said in a statement. “We have decided to take a conservative approach to the carrying value of Taza, reducing it to zero, despite still holding a material resource base.”

Oil Search is among companies struggling as crude prices are weighed down by a global glut. Producers have cut spending plans and workforce numbers, as well as dividends to shareholders, as the price collapse has punished profits. Brent oil, the global benchmark, averaged about $53 a barrel in 2015, slumping more than 45 percent from the prior year.

The company produced 29.25 million barrels of oil equivalent last year, a 52 percent increase driven by the PNG LNG project, it said. Oil Search shares in Sydney were down 3 percent at A$7.03 as of 2:10 p.m. local time. That compares with a 0.3 percent slip in the country’s benchmark S&P/ASX 200 Index and 0.8 percent gain in the MSCI AC Asia Pacific Energy Index.

In the Asia-Pacific region, Santos Ltd. last week posted a wider net loss and A$3.9 billion ($2.8 billion) in writedowns, while Woodside Petroleum Ltd. had a 99 percent drop in profit. Oil Search last year rejected Woodside’s $8 billion takeover offer, with the Perth-based producer abandoning its bid almost three months later.

The partners in Exxon’s LNG project in Papua New Guinea are considering adding capacity, while Oil Search is also in a venture with Paris-based Total SA and InterOil Corp. that’s planning the country’s second gas export project.

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