Shareholders in Oil Search (OSH), the PNG-focused oil and gas producer, can look forward to a sharp rise in dividend payouts following a strategic review of the company and its future directions.
The review follows the completion of the huge PNG LNG project 29% owned by the company which started shipping gas to customers in May.
As a result of growing production and exports (which will hit 6.9 million tonnes a year) Oil Search will have more cash to distribute to shareholders.
The new dividend policy is for 35-50% of net profits, excluding one-off items, to be returned to shareholders, starting from the second (current) half of the current calendar year. Oil Search had previously only paid a fraction of its earnings as dividends, most recently offering a first-half payout of just 2 USc per share.
“After dividend payments, we will still have substantial funds available to pursue growth opportunities,” Peter Botten, Oil Search’s long-serving chief executive, said in a statement to the ASX.
The company’s dividend reinvestment plan will be suspended with the announcement of the final dividend next February.
Mr. Botten said those growth opportunities could include expanding the Papua New Guinea project with Exxon, and building a new LNG project fed by the Elk and Antelope discoveries in the country, which Oil Search owns in a joint venture with Total SA and InterOil Corp.
“Having a range of high potential growth projects within Papua New Guinea mitigates the immediate need to expand internationally,” Mr. Botten said.
Oil search also released its third quarter production report yesterday which revealed the massive impact on the company from the PNG LNG project.
Production jumped by nearly 400% in the September quarter from a year earlier to 6.67 million barrels of oil equivalent (mmboe).
It maintained its guidance for the full year, which has already been upgraded, at between 18 and 20 mmboe.
Production net to Oil Search from the PNG LNG Project was 4.84 mmboe, while the base PNG oil and gas business contributed 1.83 mmboe.
OSH YTD – PNG LNG boosts Oil Search
Revenues for the September quarter reached a record $US538.2 million, more than triple the $US175.3 million posted in the same quarter in 2013, thanks to the project shipping 21 LNG cargoes and six oil cargoes in the quarter period.
At the end of September, Oil Search said it had cash of US$594.5 million and debt of US$4.2 billion, comprising US$4.14 billion drawn down from the PNG LNG Project finance facility and US$50 million from the company’s corporate facilities.
The company’s shares eased 1.3% to $8.60.
