By Sonali Paul and Byron Kaye
MELBOURNE/SYDNEY April 6 (Reuters) - Oil Search Ltd OSH.AX plans to raise A$1.1 billion ($666 million) through a share sale to weather weak oil prices through 2021, two people who have been approached about the capital raising said on Monday.
The Papua New Guinea-focused oil and gas producer sought a trading halt on its shares on Monday, saying it was going to announce a capital raising.
Oil Search declined to comment on its capital raising plan ahead of an announcement to the market.
The company last month slashed its planned spending for 2020 to shore up its balance sheet following a 50% slide in oil prices since the start of the year, but analysts and investors raised questions about whether it would be able to meet interest cover covenants on its debt.
The two sources said the company is looking raise A$1.1 billion. The pricing is expected to be at A$2.10 a share, one of the sources said, which would be a 23% discount to Oil Search's last trade.
"It's about being in a position to withstand low oil prices through 2021," one of the people said.
Oil Search's shares have slumped 50% in the past month.
The company is shoring itself up for oil prices to average $20 a barrel this year and $30 a barrel in 2021, one person said. Benchmark Brent LCOc1 was trading just above $33 on Monday.
As of the end of 2019, Oil Search had net debt of $2.98 billion, including $440 million in a drawn lending facility which it tapped to fund the acquisition of assets in Alaska.
"We have been very wary of OSH's (Oil Search's) exposed balance sheet since the oil price started falling," Credit Suisse analyst Saul Kavonic said in a note on Monday after the trading halt.
"We think it may be better for OSH to raise earlier rather than later, and raise big rather than small, to dispel further market conversations regarding...balance sheet risk, and given oil prices could drop lower over coming weeks," Kavonic said.
Goldman Sachs is handling the share sale, one source said. A Goldman Sachs spokeswoman did not immediately respond to an email seeking comment.
($1 = 1.6529 Australian dollars)
(Reporting by Sonali Paul and Byron Kaye; Additional reporting by Paulina Duran in Sydney; Editing by David Goodman and Muralikumar Anantharaman)
((Sonali.Paul@thomsonreuters.com; +61 3 9286 1419;))