CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Where next as Oil Search launches $1.16 billion Equity Raise

'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,' said the company's Managing Director.

It’s as if companies are trying to one up each other with just how much capital they can raise.

Last week NextDc completed a $672 million placement, Flight Centre looks well on its way to raising close to $700 million; and today, Oil Search (OSH) announced that it was planning to raise US$700 million or AUD$1.16 billion – equivalent to about a quarter of the energy company’s total market capitalisation.

Ultimately, with oil prices trading approximately 50% lower than they did just a month ago, this move is hardly a surprising one. Less surprising still was Oil Search noting that it intended to use the funds from the proposed raise to shore up its balance sheet and increase liquidity, so that the company could ‘withstand a prolonged period of low oil prices.’

For reference, Oil Search's stock has also fallen approximately 50% in the last month.

Oil Search share price: details of the raise

The largest portion of this $1.16 billion equity raise will be made up of an underwritten institutional placement – which aims to raise some $760 million.

Oil Search will also raise as much as $400 million from 1 for 8 accelerated non-renounceable Entitlement Offer – aimed at both retail (non-underwritten) and institutional investors (underwritten).

'A non-underwritten PNG offer for eligible PNG shareholders on substantially the same terms as the as the Entitlement Offer [...] subject to obtaining PNG approvals,' was also announced.

Off the back of all this, Oil Search currently expects to issue approximately 552 million new shares at $2.10 per share. Like many of the companies now tapping the market for fresh capital – these new shares will be issued at a steep 23.1% discount to Oil Search’s last traded price of $2.73 per share.

At its 52-week high, Oil Search’s stock traded hands at $8.30 per share. So, a 74.69% discount, to that price.

Other bits and pieces

Besides raising fresh capital, Oil Search today announced a number of other measures it is currently implementing in response to elevated levels of market volatility, including: the suspension/ deferral of various discretionary activities; the implementation of cost cutting measures such as salary cuts and headcount reductions; and the implementation of business continuity plans as they relate to potential Covid-19 disruptions.

The company also noted that it had extended the ‘maturity of the US$300 million loan facilities from 13 September 2020 to 30 June 2012, such that Oil Search now has no near-term debt matures on its corporate facilities,’

OSH also noted that it was on track to hit its previously stated 2020 full-year production guidance.

How to trade gas and energy stocks

What do you make of Oil Search’s gargantuan $1.16 billion equity raise announcement: is it a positive or a negative? Though at the time of writing OSH remains suspended from trade, you can still use IG’s world-class trading platform to trade a variety of gas and energy stocks – long or short

For example, to buy (long) or sell (short) Santos using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘Santos’ or ‘STO’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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