The Perth-based company yesterday reported a 31% drop in net profit to $13.35 million in the six months ended December 31, 2006, from the $19.36 million posted for the first half last year.

Arc said the lower profit was mainly due to increased depreciation and amortisation charges and a $4 million write-off of unsuccessful exploration expenditure.

Revenue gained 5.4% to $60.55 million, due largely to an increase in the average price per barrel of oil from $A74.42 to $79.08 and an increase of 13% in the portfolio gas price.

Basic earnings per share were 5.97c, down from 9.24c.

The company said overall production remained essentially steady at 5929 barrels of oil equivalent per day, compared with 6161boepd for the six months to December 31, 2005.

It said production is expected to remain steady for the next half year, subsequent to successful development activity during the latest half.

Cash reserves increased to $57.2 million despite the continuous development drilling program being undertaken.

Managing director Eric Streitberg said the half-year result highlighted the cashflow “strength” of the company’s underlying oil and gas business.

“This strength provides the foundation for us to grow the company through targeted exploration and soundly based business development activity,” Streitberg said.

“We will shortly complete the Perth Basin development drilling program that underpins our cashflow strength and will be moving into exploration drilling in the Perth Basin before moving to the Canning Basin in May 2007.

“Our business is driven by value-adding activity and careful technical evaluation of exploration and commercial opportunities and we look forward to 2007 with confidence.”