PERTH (miningweekly.com) – Oil and gas major Oil Search is hoping to raise some A$1.1-billion to assist the company in retaining liquidity during the low oil-price environment.
The equity raising will consist of an underwritten institutional placement to raise an initial A$760-million, and an accelerated non-renounceable entitlement offer to raise a further A$400-million, at a ratio of one new share for every eight shares held.
The equity raise will also include a non-underwritten Papua New Guinea (PNG) offer for eligible shareholders in that country, on substantially the same terms as the entitlement offer, and subject to regulatory approvals.
The equity raise will be priced at A$2.10 a share, which represented a 23.1% discount to Oil Search’s last closing price, and an 18% discount to its theoretical ex-rights price.
“In response to the recent rapid decline in oil prices, Oil Search has undertaken a number of decisive actions to preserve capital and strengthen the balance sheet, while also maintaining safe and reliable operations,” said MD Keiran Wulff.
“At this difficult time, our highest priority is the health and safety of our personnel and communities in which we operate. In February, we established a Covid-19 taskforce, which in response to the World Health Organization recommendations, has taken steps to minimise the impact of the virus on our people and our business.
“We continue to be in regular dialogue with the PNG government to minimise any disruption to our operations and ensure our customer obligations can be safely met.”
Oil Search previously announced the deferral or suspension of discretionary activities which has resulted in a 40% reduction in investment expenditure for 2020, while also executing preliminary cost reduction measures, including salary cuts and a systematic review of operating costs.
Wulff noted that the capital preservation measures, along with the equity raise, are intended to ensure that Oil Search could withstand a prolonged period of lower oil prices.
“Oil Search believes it is well positioned to deliver on its world-class growth projects in PNG and Alaska when market conditions improve. The additional time will allow us to finalise the P’nyang gas agreement with the PNG government and optimise the Alaskan development, with a focus on reducing the breakeven cost of the project and integrating the results of the recent Mitquq and Stirrup wells.”