The company also recorded a net profit after tax of $258.6 million on the sale of an equity stake in the upstream PNG Gas project to the Australian Gas Light (AGL) earlier this year bringing total profit after tax up to US$373.9 million.

Production was actually 4% lower in the first half of 2006 compared to the corresponding period last year. But given the sale of producing assets to AGL, this was a good result, the company said.

“This is very pleasing, given that the 2006 first half profit was produced from a smaller asset base, following the sale to AGL of approximately 18% of our producing 2P reserves, effective from January 2006,” manager director Peter Botten said.

Production for the half totalled 5.33 million barrels of oil equivalent (MMboe). Oil Search said it realised an average oil price for the half of $68.94 per barrel, a 30% increase on the first half of last year.

First half revenue of $323.3 million, a 38% jump on the corresponding period last year, was also a record for the company and was said to be achieved despite a significant underlifted position at the end of June.

Botten said net field costs in PNG, excluding tariffs, were cut to $4.66/bbl compared with $5.23/bbl in the same period of 2005.

“Despite the strong upwards pressure globally on oil services and equipment, during the first half of 2006, we were very successful in keeping costs under control,” he said.

“While costs are likely to increase in the second half of the year, due to planned maintenance programs, an acceleration of drilling activity and well work, we are confident that our cost structure will enable us to remain highly competitive.”

The company said its cash position continued to grow, with the company debt free and holding cash of $537.3 million.

Oil Search said full-year production is now expected to be at the bottom end of the range forecast early in the year, of 11-11.5MMboe.

An interim dividend of US4c per share will be payable to shareholders on October 13.