Shareholders in oil and gas explorer and producer Oil Search Limited (ASX: OSH) would recently have been cheering as its stock rallied to not just a brand new 52-week high but also an all-time high of $9.56. The new high coincides with the recent announcement that first production from the PNG-LNG project has commenced ahead of schedule.
Oil Search has certainly been a resounding success for investors with the stock price gaining 656% in the past decade. That's outperformance of nearly 600% compared with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).
While the past gains provide enough reasons for shareholders to cheer, here are three more reasons that cheering is likely to continue…
1) Oil Search could be set for inclusion in the Top 20 which will add further buying support to the stock. With a market capitalisation of $14.1 billion, the company is now larger than Santos Ltd (ASX: STO) at $20 billion and much larger than the $7.5 billion capitalisation of Newcrest Mining Limited (ASX: NCM).
2) Dividends. The ramp-up of production from the flagship PNG-LNG project is forecast to help Oil Search achieve cash flows of $1.5 billion in coming years. While the company has a number of growth opportunities, dividends are also expected to increase substantially.
3) The growth prospects for Oil Search are exciting. Not only does the stock provide shareholders with exposure to the growing energy demands of Asian customers, but Oil Search has numerous expansion opportunities in the PNG Highlands which could see further LNG trains built, resulting in a more than doubling of the current production base.
The total shareholder returns from owning Oil Search compared with the returns of both Santos and Woodside Petroleum Limited (ASX: WPL) are stark. While Santos and Woodside have returned 324% and 490% respectively over the past 11 years and 5 months, Oil Search has produced a return of 1,720%!
With gas only just beginning to flow and significant opportunities to further expand production it's quite possible that in another decade shareholders will still be cheering Oil Search on.
