Oil Search PNG, led by CEO Peter Botten, has recently advised a write-down of US$200 million to re-value the company in light of the recent dip in oil prices, as reported by The Financial Review.
While this move may strategically position the company in terms of its assets and equity, it raises questions about the impact on shareholders and the assessment of the government's shareholding on behalf of Papua New Guineans.
Has Peter O'Neill been misled into borrowing and investing heavily, and will the write-down affect the company's share price? And, what does this mean for shareholders and Papua New Guinea Government?
Share Price and Shareholders
A write-down of US$200 million is a significant amount that can greatly impact a company's value. However, it may also serve to put a positive spin on Oil Search's balance sheet and save face for CEO Peter Botten.
The company has shown strong growth, and there may not be immediate cause for alarm. Nevertheless, shareholders may be concerned about the potential impact on the company's share price.
Positive signs can be seen, as Oil Search's share price has been picking up from a low of AUD6.93 in December 2014 to a high of AUD8.24 in February 2015.
While there may be fluctuations in price, it remains to be seen whether the US$200 million write-down will have a negative effect on the share price.
Share price is often considered a good indicator of a company's value in real-time, and if it drops again after the write-down, Peter O'Neill may not be able to solely blame the oil price dip, but also the actions of Oil Search's leadership.
Government Shareholding and Investment Decisions
As a major shareholder in Oil Search, the Papua New Guinea Government needs to carefully assess the value of its shareholdings before any write-down goes ahead.
A fall in share price after a significant write-down could have devastating consequences for the government and the people of Papua New Guinea.
The write-down of US$200 million is a substantial amount, equivalent to double the operating revenue of Oil Search as of September last year. This could potentially erode a significant portion of the company's value.
Questions arise as to whether this write-down is a mere smoke-screen to cover up poor investment decisions if any potential investments are cut. It is crucial for the government to thoroughly evaluate the situation and ensure that the best interests of Papua New Guineans are safeguarded.
Conclusion
Oil Search's recent announcement of a US$200 million write-down to re-value the company due to the dip in oil prices has raised concerns among shareholders and the Papua New Guinea Government.
The impact on the company's share price and the government's shareholding needs to be carefully considered, and questions about the company's investment decisions need to be addressed.
As the situation unfolds, all stakeholders, including shareholders and the government, will be closely watching the developments and their potential implications for Oil Search and Papua New Guinea's economy.
