Oil Search plans to raise $US700 million ($1.160 billion) as it manages the financial challenges caused by the oil price slump and COVID-19 pandemic.
The company has launched an entitlement offer, an institutional placement and an offer to eligible Papua New Guinean shareholders to raise the funds.
Oil Search reported that the proceeds raised would be used to strengthen its balance sheet and increase liquidity, so that it can withstand a prolonged period of low oil prices.
However, Oil Search has reassured the market that it is well-positioned to deliver its world-class growth projects in PNG and Alaska when market conditions improve.
In response to the difficult environment, the company has taken several steps, including the suspension of discretionary activities within its control, resulting in a 40 per cent reduction of its 2020 forecast investment expenditure guidance.
The company has also executed a preliminary cost reduction measure and commenced a systematic review of operating costs to be implemented by June.
To protect it from the impact of COVID-19, Oil Search has implemented business continuity plans and amended work practices.
The company has reconfirmed its 2020 full year production guidance of 27.5-29.5 mmboe, assuming no business interruption from COVID-19.
Oil Search managing director Kieran Wulff commented: “Our capital preservation measures, together with the equity raising are intended to ensure that Oil Search can 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.”
In addition, Oil Search has advised that testing of the Nanushuk reservoirs encountered in the Mitquq 1 ST1 and the Stirrup 1 wells in Alaska’s North Slope has been completed.
The company reported that both wells were drilled, logged, cored and flow tested, which included a clean-up, flow period and a pressure build-up prior to the final flow test to assess well deliverability.
Mitquq 1 ST1, a sidetrack from the Mitquq 1 oil discovery located 9km east of the proposed central processing facility of the Pikka unit development, encouraged a net pay zone of 52.5m with a gas cap of 9m.
Following the test, Oil Search tracked the well flow at a rate of 3520 barrels of oil per day (bopd) from a single stimulated zone.