Oil Search (OSH) forced into capital raise
Oil Search (OSH) -3.39%: Back online after raising US$683m of new capital to boost liquidity and lower gearing. Funds were raised at $2.10, by way of an Institutional placement and 1:8 non-renounceable entitlement offer. The issue price is at an 18% discount to TERP and 23% discount to last close. The main reason for the raise is to reduce gearing from 35% to 28% and increase liquidity to protect against an extended period of low oil prices. Raising equity at a steep discount at the bottom of an oil price cycle is not ideal but necessary to reduce the balance sheet risk.
In terms of the other energy players, Beach (BPT) has no debt, Woodside (WPL) has gearing around 13% while Santos (STO) is around 27%, however they have a better break-even point than Oil Search.
We like the energy sector into current weakness and own STO & BPT in the Growth Portfolio, & Woodside (WPL) in the Income Portfolio.
Oil Search (OSH) Chart
