Production fell 10% year-on-year to 3.56 million barrels of oil equivalent from its maturing fields in Papua New Guinea during the recent half.
But Oil Search lifted its net profit 117% year-on-year as its received oil prices increased 53% to an average price of $116.89 a barrel.
Development of the ExxonMobil-operated PNG LNG project is generally advancing as planned and continued construction of the first train and the marine jetty at the plant site near Port Moresby will continue throughout 2011.
An offshore contractor is being mobilised to start offshore pipe laying while onshore pipeline work continues.
A two week shutdown of the Central Processing Facility started on August 16 to allow critical project work for the first two new gas dehydration units, plus upgrades to other equipment such as oil storage tanks and control systems.
This underway shutdown will lower second half production, but Oil Search still expects to hit its 2011 production guidance of 6.2-6.7MMboe.
Drilling
The Hedinia-10 well is drilling ahead at its namesake oilfield in PNG, and the planned P'nyang-3 appraisal well in the P'nyang gas field in the highlands will be operated by Oil Search (38.51%) on behalf of Exxon.
As part of its work as operator of the associated gas fields for the PNG LNG project, Oil Search will launch a vast drilling program to prove up its gas options and also find oil near existing oil fields.
Detailed technical work on establishing the reserves of its project gas fields is also underway.
"Oil Search anticipates that the results of this reserves assessment program will be known by mid to late 2012, providing insight into whether sufficient reserves have been discovered to underwrite LNG expansion or whether additional appraisal is required," the company said.
Another priority is offshore and immediately onshore exploration in the Gulf of Papua.
Seismic work dating back to last year is expected to be fully integrated by the December quarter.
Oil Search will select project partners and suitable offshore rigs for this wave of exploration afterwards, with drilling to start in 2012.
Over in Iraq, Oil Search has a 60% working interest in the Taza block in the Kurdistan region and an exploration well is planned for the Jeribe formation in 2012.
The Jeribe formation yielded test rates of more than 9000 barrels of oil per day in the recent Western Zagros Sarqala oil discovery to the southeast of the Taza block, while the Jambur field to the northwest has more than 1 billion barrels of oil reserves.
PNG LNG is scheduled to start producing from 2014 and is expected to deliver more than 9 trillion cubic feet of gas over its 30-year life.
Partners in the project are operator ExxonMobil (33.2%), Oil Search (29%), the PNG government's Independent Public Business Corporation (16.6%), Santos (13.5%), Merlin Petroleum (4.7%), state-owned Minerals Resource Development Company (2.8%) and Petromin (0.2%).
Oil Search had a cash position of $1.23 billion at the end of June and has approved an unfranked interim dividend of US2c per ordinary share, which is payable in October.
Oil Search shares were up 1c to $6.05 this morning.
