Oil Search (Oil Search) ROC % : 3.06% (As of Jun. 2021)

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What is Oil Search ROC %?

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Oil Search's annualized return on capital (ROC %) for the quarter that ended in Jun. 2021 was 3.06%.

As of today (2024-05-05), Oil Search's WACC % is 6.19%. Oil Search's ROC % is 1.11% (calculated using TTM income statement data). Oil Search earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Oil Search ROC % Historical Data

The historical data trend for Oil Search's ROC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

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Oil Search ROC % Chart

Oil Search Annual Data

Trend

Dec11

Dec12

Dec13

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

ROC %

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1.52

4.24

4.68

3.73

-2.04

Oil Search Semi-Annual Data
	Dec11	Jun12	Dec12	Jun13	Dec13	Jun14	Dec14	Jun15	Dec15	Jun16	Dec16	Jun17	Dec17	Jun18	Dec18	Jun19	Dec19	Jun20	Dec20	Jun21
ROC %	Get a 7-Day Free Trial															3.91	3.52	-3.71	0.09	3.06

Oil Search ROC % Calculation

Oil Search's annualized Return on Capital (ROC %) for the fiscal year that ended in Dec. 2020 is calculated as:

	ROC % (A: Dec. 2020 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Dec. 2019 )	+	Invested Capital (A: Dec. 2020 ))	/ count )
=	-266.266 * ( 1 - 12.29% )	/	( (11564.328	+	11302.547)	/ 2 )
=	-233.5419086	/	11433.4375
=	-2.04 %

where

	Invested Capital		(A: Dec. 2019 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	11572.853	-	337.022	-	( 396.232	-	max(0, 1120.721	-	792.224	+	396.232	))
=	11564.328

	Invested Capital		(A: Dec. 2020 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	11388.265	-	187.139	-	( 540.842	-	max(0, 969.456	-	868.035	+	540.842	))
=	11302.547

Oil Search's annualized Return on Capital (ROC %) for the quarter that ended in Jun. 2021 is calculated as:

	ROC % (Q: Jun. 2021 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Dec. 2020 )	+	Invested Capital (Q: Jun. 2021 ))	/ count )
=	482.49 * ( 1 - 30.07% )	/	( (11302.547	+	10750.428)	/ 2 )
=	337.405257	/	11026.4875
=	3.06 %

where

	Invested Capital		(Q: Dec. 2020 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	11388.265	-	187.139	-	( 540.842	-	max(0, 969.456	-	868.035	+	540.842	))
=	11302.547

	Invested Capital		(Q: Jun. 2021 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	11054.89	-	169.085	-	( 503.599	-	max(0, 707.175	-	842.552	+	503.599	))
=	10750.428

Note: The Operating Income data used here is two times the semi-annual (Jun. 2021) data.

Oil Search (OTCPK:OISHF) ROC % Explanation

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.

There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.

Why is ROC % important?

Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Oil Search's WACC % is 6.19%. Oil Search's ROC % is 1.11% (calculated using TTM income statement data). Oil Search earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Be Aware

Like ROE % and ROA %, ROC % is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.

Oil Search ROC % Related Terms

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Oil Search (Oil Search) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Energy » Oil & Gas » Oil Search Ltd (OTCPK:OISHF) » Definitions » ROC %

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Address

Ground Floor, Harbourside East Building, Stanley Esplanade, PO Box 842, National Capital District, Port Moresby, PNG, NCD 121

Website

http://www.oilsearch.com

Oil Search was founded in 1929 and operates all of Papua New Guinea's oilfields. The PNG government holds a 10% interest. Oil Search had successfully run PNG oilfields since assuming operatorship from ExxonMobil in 2003. However, the tyranny of distance saw the large and high-quality gas fields largely stranded until 2014. The PNG LNG project is the first step to monetise those vast gas resources, again under the direction of ExxonMobil. First-stage construction is complete, with potential for expansion from two trains to five.

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