“The Oil Search’s forward dividend yield for 2018 will be ‘pretty low’ at 1.8 per cent.” Analyst Reckons.

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The Papua New Guinea government took a A$1.2 billion (K3 billion) loan from the Australian arm of Swiss bank UBS in 2014 to buy shares in Oil Search, a joint venture partner in PNG’s biggest resources development, the US$19 billion PNG LNG project.

The 31.3 million shares were bought by the government at about A$8 apiece.

The Australian Financial Review reports the brokers set a floor price of A$6.55 per share, representing a 3.8 per cent discount to Oil Search’s last close and a 4.3 per cent discount to the 5-day volume-weighted average price, for A$200 million.

Kumul Petroleum Managing Director, Wapu Sonk, reportedly told Loop PNG the shares were sold for A$6.70 (K19.16), representing an on-paper loss of A$322 million (K760 million).

Development

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However, Sydney-based Fat Prophets’ research analyst David Lennox says the country has won, even though they lost out on the share sale—if the original share purchase was to protect the project.

Oil Search share sale represents a win for Papua New Guinea, says analyst

Papua New Guinea’s state-owned company Kumul Petroleum Holdings has sold its 10 per cent stake in Oil Search, with its Managing Director Wapu Sonk reportedly saying it lost A$322 million (K812 m) on the sale. However, David Lennox of investment advisory firm Fat Prophets says overall the country has benefited from the process.

The Papua New Guinea government took a A$1.2 billion (K3 billion) loan from the Australian arm of Swiss bank UBS in 2014 to buy shares in Oil Search, a joint venture partner in PNG’s biggest resources development, the US$19 billion PNG LNG project.

The 31.3 million shares were bought by the government at about A$8 apiece.

‘Don’t look at the sale of Oil Search shares in isolation.’

The Australian Financial Reviewreports the brokers set a floor price of A$6.55 per share, representing a 3.8 per cent discount to Oil Search’s last close and a 4.3 per cent discount to the 5-day volume-weighted average price, for A$200 million.

Kumul Petroleum Managing Director, Wapu Sonk, reportedly told Loop PNGthe shares were sold for A$6.70 (K19.16), representing an on-paper loss of A$322 million (K760 million).

Development

However, Sydney-based Fat Prophets’ research analyst David Lennox says the country has won, even though they lost out on the share sale—if the original share purchase was to protect the project.

‘Don’t look at the sale of Oil Search shares in isolation. You should add what they’re gaining from the development of the PNG LNG project,’ he tells Business Advantage PNG.

‘If you look at it from the point of view, that was what it took to get the project over the line. Then you’d suggest the country has been a huge winner.

‘They’ve got a US$19 billion asset that’s sitting there. It’s not there yet, but it’s generating a rippling effect.’

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