Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

Oil Search (ASX:OSH) share price up 6% despite 93% profit drop

The Oil Search Limited (ASX:OSH) share price is up 6% despite announcing a big drop in its profit. 

The Oil Search Limited (ASX: OSH) share price is up 6% despite announcing a big drop in its profit.

Oil Search is one of the biggest oil and gas businesses on the ASX.

Oil Search’s FY20 result

The oil and gas giant reported that its FY20 revenue fell by 32% to US$1.07 billion. This was generated from 29 million barrels of oil equivalent (MMboe) of production.

The underlying EBITDA (EBITDAX – which stands for EBITDA as well as impairments and exploration expenses) fell by 37% to $721.1 million.

Oil Search’s core net profit after tax (NPAT) dropped 93% to $22 million and the reported bottom line result was a net loss of $320.7 million.

The core net profit figure excludes an impairment expense of US$374.2 million (or US$260.2 million after tax), site restoration cost increases for previously impaired assets of US$21.6 million and the de-recognition of net deferred tax assets of US$61.5 million.

The oil business explained that it undertook a major strategic review to prioritise activities and capital spending for a low carbon future. It was this initiative that led to a streamlining of the portfolio and incurring the impairment charge. However, management said that the business is now a more focused, leaner and lower cost resilient business in a strong position to capitalise on its resource base and profit from the rising oil price.

You wouldn’t think that free cashflow would rise after a net profit result like the one above. But, after a focus on maximising operating cashflow, Oil Search managed to grow free cashflow by 122% to $12.8 million. It has established a dedicated transformation team to embed a high performance culture across the business.

Oil Search dividend

The board of Oil Search decided to declare a final unfranked dividend of 0.5 US cents per share. This is in line with the board’s policy of paying out between 35% to 50%.

Summary thoughts

Oil Search has done well to generate positive free cash flow despite a huge drop in profit. However, I’m not sure I could ever invest in an oil business because of the expected decline in oil demand over the long term. The oil price crunch in early 2020 would have been the best time to buy oil shares.

Before you consider Oil Search, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
Skip to content