(Corrects third paragraph to say stock's last close was on Friday, not Monday)
April 7 (Reuters) - Oil Search Ltd OSH.AX said on Tuesday it will raise up to A$1.16 billion ($706 million) through a discounted share sale and cut costs as it looks to weather a prolonged period of weak oil prices.
Oil prices LCOc1 have slumped roughly 40% since the collapse of supply-cut talks between Russia and Saudi Arabia last month and as the coronavirus pandemic crippled demand. O/R
The Papua New Guinea-focused oil and gas producer said the cash call will be at an offer price of A$2.10 per share, a 23.1% discount to the stock's Friday close.
Its largest shareholder, Abu Dhabi investment fund Mubadala, will not participate in the equity raise, the company said.
To further shore up finances, Oil Search said it would review its operating costs by June and that it had extended the maturity of its $300 million loan facilities from September 2020 to June 2021.
The company warned, however, that if oil prices averaged below low-$20s per barrel for the remainder of the year, it risked becoming non-compliant with certain financial covenants.
To that end, Oil Search said it has held preliminary talks with its lenders, who have indicated willingness to consider covenant waivers.
The company reported first quarter production of 7.3 million barrels of oil equivalent (mmboe) and reaffirmed its annual production forecast of 27.5-29.5 mmboe, assuming no further impact from the coronavirus.
($1 = 1.6437 Australian dollars)