- Oil Search (OSH) has successfully completed a $1.08 billion equity raise to shore up its operations amid the COVID-19 pandemic and oil price crash
- The money comes from an institutional placement and entitlement offer, with an extra $80 million expected from a retail entitlement offer
- Importantly, the company used an ASX waiver to maximise the amount of placement shares offered from 15 to 25 per cent – a big-time dilution
- The issue price for both the placement and entitlement offer was $2.10 per share, representing a 23.1 per cent discount to Oil Search’s last closing price
- The retail entitlement offer is expected to open on Thursday, 16 April and close on Monday, 27 April
- Oil Search is down 4.14 per cent, with shares trading at $2.55
Oil Search (OSH) has successfully completed a mammoth $1 billion equity raise to shore up its operations amid the COVID-19 pandemic and oil price crash.
The $1.08 billion (excluding costs) was raised via an institutional placement and the institutional component of an entitlement offer. A further $80 million is expected to be raised from the retail component of the entitlement offer, opening on Thursday 16 April.
Institutional Placement and Entitlement Offer
The institutional placement and entitlement offer were both popular among investors, with a take up rate of 95 per cent for the entitlement offer among eligible institutional shareholders.
The issue price for both the placement and institutional offer was $2.10 per share, representing a 23.1 per cent discount to Oil Search’s last closing price and an 18 per cent discount to the theoretical ex-rights price (TERP).
Around 514 million new shares were taken up under the placement and entitlement offer, with the shortfall offered exclusively to existing Oil Search shareholders.
In conducting the placement, Oil Search has relied on the class waiver decision “Temporary Extra Placement Capacity” issued by ASX on March 31 2020. This waiver lifts the limit on the number of new shares that Oil Search can issue without obtaining prior shareholder approval from 15 per cent to 25 per cent.
The retail entitlement offer aims to raise around $80 million and has now been fully underwritten by Goldman Sachs and Macquarie Capital. The offer is made on a one for eight pro-rata non-renounceable basis, meaning eligible shareholders may take up one new share for every eight shares they currently hold, but the new shares can’t be bought or sold.
The offer is expected to open on Thursday, 16 April and close on Monday, 27 April.
Shareholders may subscribe for an additional entitlement equating to 200 per cent of their current holdings should there be a shortfall in interest. For example, someone with 8000 shares is eligible to subscribe for 1000 shares under the offer, but should the share issue not sell out, that shareholder can then apply to purchase an extra 2000 shares at the same discounted price.
What is ahead?
Oil Search has instigated a raft of cost-cutting measures to survive the impacts of COVID-19 and the oil price crash. Along with the equity raising efforts, the company hopes it can weather the stormy seas of the current economic uncertainties.
Oil Search Managing Director Keiran Wulff says the company will use the money raised to strengthen its balance sheet and provide additional liquidity, given the material decline in oil prices.
“The proceeds of the offer, together with our initiatives to reduce costs and manage the potential impacts of COVID-19, will enable Oil Search to not only withstand a prolonged period of low oil prices but also come through the current period of uncertainty strongly, while maintaining safe and reliable operations from our oil and gas assets in PNG.
“Oil Search is well positioned to deliver our world class growth projects when market conditions improve.”Oil Search Managing Director Keiran Wulff
“Oil Search will also utilise the current downturn to undertake value engineering studies on its growth projects, drive breakeven costs down and ensure the company’s cost base, capital management and capability are optimised.”
Oil Search is down 4.14 per cent, with shares trading at $2.55 as at 2:58 pm AEST.