The Motley Fool

Oil Search Limited (ASX:OSH) shares slide lower after half-year profit falls 39%

The Oil Search Limited (ASX: OSH) share price has taken a tumble today after the release of the energy producer’s half-year results.

At the time of writing Oil Search’s shares are down 1.5% to $9.09.

Here is a quick summary of how it performed in the first half in comparison to the prior corresponding period:

  • Total production fell 31% to 10.24 mmboe.
  • Total sales fell 31% to 9.77 mmboe.
  • Average realised oil and condensate price rose 34% to US$71.45 a barrel.
  • Average realised LNG and gas price up 18% to US$9.02 per mmBtu.
  • Total revenue down 18% to US$557.8 million.
  • Net profit after tax tumbled 39% to US$79.2 million.
  • Operating cash flow down 49% to US$215.2 million.
  • Interim dividend of 2 U.S. cents per share, down from 4 U.S. cents.

The cause of Oil Search’s disappointing half-year result was the Papua New Guinea Highlands earthquake in February which disrupted the company’s operations.

This earthquake resulted in a 31% reduction in production and sales volumes, due to a temporary shut-down of both Oil Search operated production and the PNG LNG Project. It also led to a 14% increase in production costs, largely reflecting remediation and other costs associated with the earthquake, net of insurance recoveries, and the bringing forward of maintenance programmes during the earthquake shut-down period.

Fortunately, things would have been far worse had the company not benefited from stronger global oil and gas prices, a 30% reduction in depreciation and amortisation expense due to lower production, and a 51% reduction in exploration expense. The latter reflects the write-off of two exploration wells in the prior corresponding period.

One positive, though, is that management has upgraded its full year production guidance on the back of a record performance achieved by the PNG LNG Project following the earthquake.

Management now expects full year production in the range of 24 to 26 mmboe, with unit production costs expected to narrow to between US$11 and US$13 per barrel of oil equivalent. This compares to first half unit costs of US$14.04 per barrel of oil equivalent.

Should you invest?

It looks as though Oil Search is over the worst now and set for a strong second half and FY 2019. This could make it worth buying on this weakness if you’re interested in gaining exposure to rising oil prices. Alternatively, you could consider Beach Energy Ltd (ASX: BPT) or even Cooper Energy Ltd (ASX: COE).

But if energy shares are not for you then I would consider these buy rated shares that have been tipped to shine in FY 2019.

4 Stocks for Building Wealth After 50

Renowned investor Scott Phillips just released a brand-new report detailing his 4 favourite stocks to buy right now.

And I don’t know about you, but I always pay attention when some of the best investors in the world give me a stock tip.

This is your chance to get in at the very beginning of what could prove to be very special investments.

Click here to get started today!

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.