Oil Search Warns Of Significantly Lower Profitability

Oil Search Ltd. (OSH.AU) Tuesday said its revenues and profitability will fall significantly this year if oil prices remain subdued and reiterated that a capital raising is one lever it could pull to fund its growth strategy.

The Papua New Guinean-focused oil and gas company reiterated that it has undertaken a detailed review of its business to adapt to a lower oil price environment, having announced spending cuts in February.

Chairman Brian Horwood told the group's annual general meeting in Port Moresby that the company remains focused on ensuring that the Exxon Mobil-operated (XOM) PNG LNG project gets built on time. He reiterated the project is on track to make a final investment decision in the fourth quarter of this year.

Oil Search said in a slideshow presentation that the company had US$462 million cash at the end of April. It reiterated its annual production guidance after doing so last week.

It also repeated that it could consider a capital raising as well as asset sales and hedging to help fund its gas export plans.

However, Oil Search did not say that it would only consider a capital raising as "a last resort", like it did in a separate slideshow presentation on Friday.

By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957; ross.kelly@dowjones.com

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