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Oil Search to invest another US$450 million in Alaskan oil fields

The Oil Search Limited (ASX: OSH) share price is down 1.2% to $7.11 today despite the energy giant flagging that it intends to invest another US$450 million to acquire oil field assets in the Pikka Unit and Horseshoe areas of Alaska. 

Oil Search is able to make the investment under the terms of a pre-agreed option it had over the tenements that it could exercise depending on recent drilling results among other factors. 

“The Option exercise will be funded from existing corporate facilities. To provide additional financial flexibility, US$300 million of additional bank credit lines will be finalised shortly. These credit lines have a term of one year, to cover the maximum period anticipated until the planned sell-down of a portion of the Company’s Alaska interests is executed,” the company commented on its funding plans for the deal.

Oil Search is primarily known as an LNG producer thanks to its flagship Papua New Guinea LNG fields that are commonly described as some of the highest quality in the world.

However, diversifying into oil makes sense as a strategy even if its PNG-based staff might not be overly keen on a transfer to work on the permanently frozen oil fields of Alaska. 

Despite rising oil prices the stock is actually down nearly 20% over the past year as LNG revenues tumbled in the March 2019 quarter partly due to the timing of LNG shipments.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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