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Why the Oil Search (ASX:OSH) share price is beating the energy index

Shares in the Papua New Guinean oil and gas producer continue their run over the previous months.
The post Why the Oil Search (ASX:OSH) share price is beating the energy index appeared first on The Motley Fool Australia. –

The Oil Search Ltd (ASX: OSH) share price continues to edge upwards this year-to-date, outpacing the Australian broad energy index since January 1.

The Oil Search share price has finished the last 5 trading sessions around 3% in the green to close last week at $3.86. It is up 0.13% to $3.87 in early trading today.

Let’s dive into what’s been happening in Oil Search’s growth story of late.

What has Oil Search been up to lately?

Back in late May, Oil Search shares surged following announcements the company was seeking a beneficial outcome with PNG Power Limited (PPL), after it had received an “unforeseen notice of termination” on 27 May 2021.

The termination notice concerned a PNG Biomass Purchase Agreement (PPA) which was signed between the two companies in 2015. It included the construction of a power plant and solar farm in a bid to add more renewable energy to the country’s Ramu power grid.

Oil Search said the PPA was aligned with the PNG government’s aim to diversify Papua New Guinea’s energy mix and contribute to sustainable, long-term job creation.

In the notice, Oil Search country manager Leon Buskens stated:

We intend to work with PPL to find a resolution to move forward together. We are ready to build the power plant and solar farm. We have met all obligations in the PPA under our control in order to reach Financial Close and we have strong funding support from international agencies who recognise the social benefits of this project.

We have a dedicated team ready to work with PPL to support them to meet their obligations. We are ready to be part of the power solution and the energy mix and help the country transition to 100% renewable by 2050.

Oil Search shares jumped from $3.64 to $4.21 in the 5 days following the announcement.

Mubadala divestiture

On June 25, Bloomberg LP reported Emirati sovereign wealth fund Mubadala sold 4.5% of its stake in Oil Search for a total of $362.8 million.

According to Bloomberg, Mubadala had originally acquired a 17.6% stake back in 2008 and the sale of 94 million shares in Oil Search lowered its stake to 4.94%. The shares were offered for $3.86 or best via broker Citi Group.

The company’s share price held up well following the sell-off, posting a 2.17% gain in the days following the announcement.

Oil Search share price snapshot

Having posted a year-to-date return of 2.39% in the green, the Oil Search share price has beaten the S&P/ASX 200 Energy Sector Index (ASX: XEJ)’s return which is up 2.17% at the time of writing.

Over the previous 12 months, Oil Search has posted a 20% return versus the Energy Index’s return of 8.85%.

Despite these returns, Oil Search shares have lagged behind the S&P/ASX 200 Index (ASX: XJO)’s 12-month return of 21.5%.

Over the previous 1 month, the company’s shares are in the red by 6.42% at the time of writing, whereas the S&P/ASX 200 Index has posted a return of about 0.3% in the green over this time.

At a share price of $3.87, Oil Search has a market capitalisation of $8 billion and pays a dividend of 7 cents per share.

Currently, the Oil Search share price is trading off its 52-week high of $4.62 but is above its 52-week low of $2.50.

The post Why the Oil Search (ASX:OSH) share price is beating the energy index appeared first on The Motley Fool Australia.

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