The Oil Search Limited (ASX: OSH
) share price was briefly up by more than 3% today after the company announced massive growth in half-year profits.
Oil Search is an oil and gas exploration and development company which primarily operates out of Papua New Guinea. Established in 1929, Oil Search has become PNG’s largest company and investor, operating all the countries producing oil fields.
Financial Results
For the six months ended June 30 2019, Oil Search’s net profit after tax (NPAT) more than doubled on the previous corresponding period to US$161.9 million. The massive jump in net profit came on the back of a 39% uptick in sales to US$776.9 million.
Operating cash flow also got a healthy boost up 72% for the half to US$418.5 million. The strong cash flow generation supported a 150% increase in the half-year dividend which increased to US5 cents per share.
Uncertainty Over Gas Deal
Oil Search management will be seeking to gain clarity over a gas deal with the Papua New Guinea government in the coming weeks as it hopes to keep a US$14 billion LNG expansion project on track following a recent change of leadership in PNG.
Oil Search’s CEO said initial works will not proceed without an agreement to terms with the PNG government. The LNG expansion has been thrown into chaos ever since James Marape took over as Prime Minister promising to ensure that more benefits would go to the local community as a result of gas development in the region.
Waiting For An Outcome
If a satisfactory arrangement is not reached it could have quite a detrimental effect on the Oil Search share price. If I were interested in buying shares I would be waiting to see how this plays out in the coming weeks before making any decision to buy (or sell) shares.
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Disclosure: At the time of publishing, Luke has no financial interest in any companies mentioned.
