OSH 0.00% $4.04 oil search limited

market does not seem to be impressed!, page-2

  1. 1,035 Posts.
    By Alex Tilbury
    BRISBANE, July 21 AAP - Oil Search Ltd will pay $US96.6 million
    ($A149.79 million) to buy the Papua New Guinea oil assets of United
    States energy major ChevronTexaco, cementing its dominant position
    in the region.
    Analysts said the agreed price was a win for Sydney-based Oil
    Search considering the speculated price tag had been $US200 million
    ($A310.13 million) to $US300 million ($A465.19 million).
    Oil Search plans to fund the purchase from existing cash and new
    debt, presently being negotiated as part of its refinancing
    program.
    Even if fully funded from new debt, the company said the deal
    would only increase its gearing to 20 per cent.
    Oil Search was seen as the natural buyer of the assets
    considering it already owned around 50 per cent of the oil
    developments and had secured operatorship from ChevronTexaco last
    month.
    Oil Search will become the operator and biggest owner of the
    Kutubu, Moran and Gobe fields by the end of October, when its
    dominant equity share pushes to more than 70 per cent across what
    are PNG's key oil fields.
    The acquisition lifts Oil Search's oil production around 20 per
    cent per annum in the short to medium term and strengthens its
    production base.
    Oil Search managing director Peter Botten said the company knew
    the assets extremely well and was very satisfied with the price to
    be paid.
    "It was a competitive tender process which settled on a price
    which we felt comfortable with," he told AAP.
    "...We were not desperate for it, as we've said publicly before
    that we would only be interested in the assets if they became
    available at the right price."
    Mr Botten said the acquisition would immediately deliver
    material positive results to the company, adding reserves and
    production at a very competitive price.
    "The acquisition adds substantial value both in terms of cash
    flow and earnings and it will materially change our earnings, which
    are dependant on the final oil price.
    "But we think it is materially accretive for both cash flow per
    share and earnings per share in 2004 and 2005."
    Oil Search shares were steady at 86 cents at 1230 AEST, after
    earlier rising to 88 cents.
    One Sydney-based oil and gas analyst said Oil Search secured the
    assets at a good price, considering the speculated range was much
    higher.
    "I think it was an opportunistic acquisition which was obviously
    not very competitively bid," he said.
    "I expect Santos to have taken a look but larger companies like
    Santos would have wanted to operate the assets."
    He said the market cheered the news as Oil Search was a cheaper
    operator than ChevronTexaco as it had a lower cost base was lower
    and was dedicated to PNG.
    ChevronTexaco will exit PNG after selling its four major PNG
    crude oil developments currently in production (Kutubu, Moran, SE
    Gobe and Gobe Main), as well as interests in three discoveries at
    SE Mananda, Saunders and Paua.
    Under the agreement, Oil Search will purchase all ordinary
    shares of ChevronTexaco Niugini Holding Ltd (CNHL), net debt,
    associated equity instruments and working capital for a total
    consideration of $US96.6 million.

 
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