The company had originally forecast production of between 10.5-11MMboe.

Oil Search said its third drilling rig would not be operational until late this year while Rig 4's arrival has been delayed to the third quarter of 2008, pushing the start of its development drilling program back until the fourth quarter of 2007.

"The result is a deferral of production from 2007 into early 2008, with production additions from development impacting primarily in late 2008 and extending into 2009," said company managing director Peter Botten.

He added that production for 2008 was expected to be similar to this year before increasing by 10-15% in 2009.

"In light of the revised production outlook, Oil Search is undertaking a review of its capital and operating expenses to evaluate opportunities to reduce or re-prioritise expenditure during the second half of 2007 and into 2008," added Botten.

Oil Search also reported oil and gas production pf 2.45MMboe for the quarter ended June 30, 2007, up 7% from the previous quarter.

Sales revenue was also up by 54% to $US177.8 million despite bad weather in Australia deferring the sale of 230,000 barrels of oil to the third quarter.

In other news, the company has brought its NW Moran well back on-stream on June 30 after the PNG Department of Energy gave the green light for it to continue the extended production test for a further six months.

Oil Search said this will give sufficient time for all outstanding landowner issues related to the production development licence 6 application to be resolved.

The NW Moran well and NW extension of the Moran field will be integrated formally into the Moran unit once all commercial agreements are confirmed and the PDL 6 approved.