A forecast $1.65-1.75 billion is destined for Oil Search's share of costs this year for building the ExxonMobil-led PNG LNG project, while $240-280 million is earmarked for exploration.
The major drilling campaign aims to satisfy separate goals of supporting a possible PNG LNG expansion and starting up a "Gulf Area LNG" project.
In the coming weeks and months there could be some answers to where PNG LNG expansion gas will come from.
The Oil Search-managed P'nyang South 1 appraisal well (petroleum retention licence 3) remains underway in PNG's Western Province, which will be followed by the ExxonMobil-operated Trapia-1 exploration well in the Southern Highlands.
From midyear there are plans to spud the GWC well in this region to potentially increase resources of the PNG LNG project's key Hides gas field, while evaluation of drilling targets in associated gas fields is continuing.
Oil Search has stakes in two onshore petroleum prospecting licences in PNG's Gulf province and stakes in four offshore PPLs in the Gulf of Papua.
Based on seismic results from last year, Oil Search believes this acreage could support "two LNG trains" with more than 30 drilling opportunities already identified.
The first plans are for two, yet to be finalised, offshore wells with the rig to be selected in the June quarter for a first spud in the last quarter of 2012.
The drilling ambitions are independent of ongoing negotiations with potential Gulf area partners according to Oil Search - which is targeting a midyear joint venture deal.
PNG LNG progress and that landslide
On January 24, a severe landslide occurred near the Tumbi limestone quarry used by the PNG LNG project in the Southern Highlands, which claimed dozens of lives and buried homes plus a key road.
While there is some debate over the causes of the landslide - such as whether there were other factors at play aside from high rainfall - Oil Search said the government was expected to undertake an independent investigation.
While most of the PNG LNG project work in the wider area had resumed, Oil Search said road access would be restored soon and the landslide was not expected to impact the schedule of first LNG exports in 2014.
Low-grade aggregate from the quarry was used for the project's Komo airfield site - an important development which would strengthen logistics in the region.
There was a recent workplace fatality at the site and Oil Search listed the completion of the airfield as the top PNG LNG focus item for this year in its results presentation.
The nearby Hides gas conditioning plant development was second on the list, with the project aiming to complete structural steel erection and mechanical construction of the plant's major equipment this year.
Other possible project milestones for this year include starting the topside jetty works at the LNG plant near Port Moresby, completion of the offshore pipeline and the onshore Kopi/Kutubu sections of pipeline and the start of development drilling.
The PNG oil producer made $202.5 million in net profit after tax last year, which was slightly above its 2010 result after Oil Search included the recent $33.2 million impairment from losing its 15% stake of the Shakal block licence in Iraq's Kurdistan region.
Profit for the year rose 9% on 2010, reflecting a 45% rise in the average realised oil price of $116.09 per barrel, which more than offset 10.6% lower sale volumes.
Total oil and gas sales dropped to 6.63 million barrels of oil equivalent in line with a 12.7% drop in production to 6.7MMboe.
Production was lower than in 2010 due to a planned facilities shutdown for the PNG LNG project-related construction work and natural field decline.
Production for 2012 is expected to be 6.2-6.7MMboe.
Managing director Peter Botten said the "solid" 2011 profit result more than offset the decline in sales volumes, ongoing cost pressures in PNG and the impact of the strengthening PNG kina and Australian dollar.
"If significant items are excluded, net profit after tax rose 64%, from $US144.1 million to $235.7 million," he said.
Revenue from operations jumped 25.6% to $732.9 million, with the impact of lower volumes offset by higher oil prices.
Operating costs for the year rose almost 19% to $132.9 million due to inflationary pressures in PNG and the strength of the kina.
The strengthened Australian dollar relative to the US dollar during the year also put pressure on Oil Search's Australian denominated expenditures.
Botten said a number of additional costs including the establishment of the Oil Search Health Foundation and non-recurring expenses associated with ensuring the longevity of infrastructure were also incurred during the year.
Analysing the announcements yesterday, Macquarie Private Wealth said Oil Search's cash reserves of more than $1 billion were $300 million more than it forecast at the time of the financial investment decision for PNG LNG.
"This increasingly strong balance sheet enables management to consider a more aggressive drilling program or even the possible development of a third train," MPW said in a report on Oil Search.
The investment bank believes the Komo airfield will be completed this year and in the "worst case" will be finished only a couple of months later than originally planned.
"At Komo, the revised plan for a simpler facility should see the first planes arriving by year-end while the capital expenditure phasing means that there is limited remaining exposure to the Australian dollar (although Kina appreciation will remain a more modest concern)," MPW said.
Overall, it said 2012 was shaping up to be a crucial year with more than 30% of the overall $15.7 billion PNG LNG budget due to be spent.
"Get this right and [the] project will be significantly de-risked," MPW said.