Oil Search Cancels Dividend But Share Price Pushes Up (ASX:OSH)

It’s been a tough ride for oil companies during the pandemic and Oil Search Ltd [ASX:OSH] is no different.

Today the company released their half-year results. While both production (4%) and sales (2%) were up from the same period last year, the company reported a net loss after tax of US$266.2 million (around AU$371 million).

This is quite a difference from the US$161.9 million in profit they had this time last year.

Total revenue was also down by 19% to US$625.6 million and core profit after tax decreased by 85% to US$24.7 million.

The hit came from a double whammy of low oil prices and higher exploration expenses.

The company got a realised average oil price of US$35.91, which is 45% less than the US$65.26 they were getting this same time last year. Average LNG and gas prices also dropped by 15%.

Oil demand has taken a hit during the pandemic

Oil demand fell in April with the pandemic lockdowns, causing oil prices to collapse.

With the future of oil and gas prices looking bleak, Oil Search announced an asset write-down of between US$360 million and US$400 million before tax this year. The final impairment was US$374.2 million before tax, US$260.2 million after tax.

It’s not the only Aussie energy company that’s had to write-down assets. ASX-listed Santos Ltd [ASX:STO] also reported a loss and a write-down in assets last week. You can read more on this here.

Oil Search has also cut a third of their workforce and went on to raise US$700 million from investors to increase liquidity.

Oil Search is on the green today

Even with all the bad news, The OSH share price has pushed 1.8% higher today. At time of writing, Oil Search is trading at $3.06.

Even so, the company has had an over 55% fall in their share price since the beginning of the year when shares were trading above the $7 mark.

In a move to preserve capital and because of the uncertainty in oil prices, Oil Search has decided to cancel the dividend for the first half of 2020. Though the board has promised to take another look at dividends at the end of the year.

For the same period last year Oil Search paid investors a 5-cent dividend per share. It just goes to show that because a company has paid dividends in the past, they’re not always guaranteed.

If you are interested in dividend plays you can check out editor Greg Canavan’s free report ‘Five Dividend Stocks set to Thrive in the Post-Pandemic Era’.

You can access it here.


Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

The Rum Rebellion