Oil Search USD200 million write-down: Will The Company Get Another Cash Injection From PNG Government?

Pic courtesy: images.smh.com.au
The Financial Review indicated Peter Botten's Oil Search has advised write-down of US$200 million to re-value the company due to the recent dip in oil price. 

This valuation is to position the company strategically as far as assets and equity are concerned. But what needs to be considered is the assessment of government's shareholding on behalf of Papua New Guineans. Is Peter O'Neill misled to borrow and invest heavily? Will the write-down increase share price?


A US200 million dollars write-down is a lot to take off a company's value. Though it is paper value, the write-down is likely to put a positive spin on Oil Search balance sheet and save P. Botten's face.

The company has strong growth, for sure. There is no need to be alarmed about it. Perhaps the important investment decision is for Papua New Guinea Government (as a major shareholder) to re-assess the value of their share holdings before any write-down goes ahead.

A fall in share after any write-down will devastate shareholders. Now, there are positive signs: Oil Search share price is picking up from a low AUD6.93 (December 2014) to a high AUD8.24 (February 2015). There are likely to be fluctuation in price, but a total wipe put of 200 million US dollars will not have a negative effect on share price?

Share price gives good indication of company's value in real time. If the company's share value drops again after any write-down, Peter O'Neill does not have to blame the Oil Price dip. The buck stops with the other Peter from Oil Search. 

Again, this (write-down) can be akin to a mere smoke-screen to cover up very poor investment decision IF any potential investments are cut. The point is that US$200 million write-down is a lot - DOUBLED the 'operating revenue', 30th Sept last year. A huge chuck would have been taken away from Oil Search's value with this write-down