Oil Search has cut back its full year production target after recording a drop in half year profit due to increased exploration activity.
Analysts said Oil Search's 13 per cent fall in half year profit was worse than expected as the company pushed towards its first sales from its liquefied natural gas (LNG) project in Papua New Guinea next year.
Oil Search, Australia's third-largest oil and gas producer, has forecast production of between 6.2 million and 6.7 million barrels of oil equivalent (mmboe) in 2013, compared to 6.4mmboe in 2012.
Managing director Peter Botten declined to offer a full year profit forecast but said Oil Search was in a period of change.
"We think production will be pretty flat from PNG last year versus this year," Mr Botten told analysts on Tuesday.
"We hope the oil price will remain north of $100 but one of the things that did impact our performance for 2012 was how many successful versus dry holes drilled."
He said the company was embarking on a period of high expenditure.
"Our focus is spending and putting that money into PNG LNG and its growth and that's where it will be until the first LNG sales start."
Oil Search reported a net profit of $US175.8 million ($A171.4 million) for the six months to December 31, down from $US202.5 million in the previous corresponding period.
This fall was largely due to a higher exploration expense, of $US144 million ($A140.40 million) compared to $US60.6 million in 2011.
This reflected the company's increased level of exploration activity in 2012.
The company said its LNG project in Papua New Guinea was 75 per cent complete and on target for first sales in 2014.
Mr Botten added that there would be some changes to the company's board as it conducted an internal review in 2013.
"There is a significant review internally about our responsibilities," Mr Botten said.
Refurbishment of the board would inevitably come as the company moved towards its first LNG sale, he said.
Oil Search plans to spend about $200 million on exploration in 2013.
The company declared a final dividend of two US cents per share, unchanged from the previous year.
Morningstar analyst Mark Taylor said the result was around 10 per cent below forecasts due to higher costs.
"A sharp higher quarter is expected in costs because they had to purchase third-party gas," he said.
Mr Taylor said he was comfortable with the company's production predictions.
"It's not inconceivable that Oil Search could be compelled to raise some additional cash between now and 2014," he said.
Oil Search shares closed eight cents, or 1.08 per cent, lower at $7.35.