Oil Search flags ‘pain’ on horizon
OIL Search expects some pain ahead despite defying plunging oil prices to lift its half year profit by 50 per cent.
The PNG-focused company is targeting cuts of between 15 and 20 per cent in operating and capital costs from 2016, and has allocated $US10 million on restructuring in 2015.
“We’re in pretty good shape to weather the storm,” managing director Peter Botten said. “There will be some pain in Oil Search. We clearly are going to reduce our cost base and we’re going to be reinvesting in the future.”
Oil Search’s realised oil price over the six months to June almost halved from a year ago to $US56.64 a barrel.
The US crude benchmark fell below $US40 a barrel for the first time in six years yesterday, amid worries about China’s weakening economy and a glut of supply.
Mr Botten said prices would not rebound soon but longterm pricing would be in the range of $US50-$US60 a barrel.
“I hope it’s higher but we can’t run our business on hope,” he said.
Net profit rose 49 per cent to $US227.5 million ($317.69 million) in the six months to June, in contrast to many of its peers. Oil Search shares gained 9¢ to $5.90. BHP Billiton has posted its worst profit in more than a decade as a broad slump in commodity prices cuts deep into its bottom line.
The world’s biggest miner also reduced its forecast for peak steel demand in China and warned investors to brace for more market volatility as the Chinese Government restructures its economy.
The mining giant reported an 86 per cent fall in attributable profit to $US1.9 billion.
The more closely watched underlying profit, which strips out one-offs, more than halved to $US6.42 billion.
That is the lowest result since 2004 and well below the $US7.5 billion analysts had