Financial Performance Analysis: Jupiter Energy Ltd and Oil Search Ltd

This report provides a detailed financial performance analysis of Jupiter Energy Ltd and Oil Search Ltd. It begins by describing the operations and competitive advantages of both companies. The report then calculates and compares key financial ratios (liquidity, profitability, and capital structure) over the past three years. It analyzes share price movements on a monthly basis over the last two years, identifies factors influencing share prices, and computes beta and expected rates of return using CAPM. Furthermore, it compares the dividend policies of the companies and concludes with a recommendation regarding their inclusion in an investment portfolio. The analysis utilizes financial statements and market data to provide a comprehensive overview of each company's financial health and investment potential. The report highlights the contrasting financial performances of the two companies, with Jupiter Energy facing significant challenges and Oil Search demonstrating more robust performance.

Financial performance of two
companies 1) Jupiter Energy
Ltd ASX code -JPR GI
financial performance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1. Describing operation and competitive advantage of both selected organization...............1
2. Calculation and comparison of past 3 years.......................................................................2
3. Analysing share price movements of companies on monthly basis over last two years..14
4. Identifying factors leading to influence prices of shares..................................................15
5. Computation of beta and expected rates of return by incorporating CAPM of ASX listed
companies.............................................................................................................................16
6. Comparing dividend policies of companies.....................................................................17
7. Recommending client regarding inclusion of organisation in his portfolio.....................18
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Financial statements plays very important role for assessing financial performance and
wealth of organization in appropriate manner. The present report will discuss about Jupiter
energy Ltd and Oil Search Ltd as both comprise in similar industry. It will provide brief
description of operation and comparative advantage of both organization. It would signify
performance comparison with application of financial ratio. It will analyse monthly share price
movements within 3 years. In the similar aspect, it will determine significant factors which might
influence share price of our both selected organizations. Further, it will extract value of beta and
expected rate of return with application of CAPM. It will determine and compare dividend policy
along with recommendation.
1. Describing operation and competitive advantage of both selected organization
Oil Search Ltd: It was founded in 1929 and in 2006 it was responsible for GDP of Papua
as 13%. It is the largest gas and oil exploration and development organization which is situated
in Papua New Guinea. This organization also operates in Yemen, Libya, Egypt and Kurdistan
region of Iraq. In year 2013, it was listed on Dow Jones Sustainability Index Australia. Its major
operation is via PNG business unit, exploration and various other segments. It is engaged in
production, and sale of crude oil, natural gas, naphtha, liquefied natural gas, power generation
activities and major refined products. It believed in competitive entry price. There is presence of
significant appraisal along with upside exploration within leases. It has observed Oil search
leverage along with core competencies for managing local stakeholders and operation in remote
location and rebalancing its portfolio of organization between gas and oil. In the similar aspect,
characteristics of high performance culture considers commitment of innovation and wish to seek
or create innovative opportunities for competitive advantage (Annual Report of Oil search Ltd.
2017).
Jupiter Energy Ltd: It operates as production and oil exploration organization in
Kazakhstan. It is based in West Perth, Australia. It has acreage in Kazakhstan with ownership of
100% block 31. Majority of its employees are based on Aktau Office, the operational centre of
business entity with location of 80 km from block 31. It has strong belief on local content and
focused to local employment on basis of employees of Aktau being Kazakh. It is currently
generating three wells on Akkar East field with their own trial production license (Jupiter Energy
Ltd, 2018). The company is performing towards returning its 2 west Zhetybai well to trial
1

production in third quarter. It has only capability for selling oil which is produced in Trial
Production period in domestic market.
In year 2008, it had acquired 100% of block 31 which is situated in oil rich Mangistau
which is near to port city of Aktau. This organization has proven in country management team
through experienced, international board for possessing skills, network, knowledge and attention
to detail required for operating in efficient aspect. The topside infrastructure is referred as key
element for moving toward long term production and attainment of self funding for various other
developments.
2. Calculation and comparison of past 3 years
Liquidity ratio
Current ratio:
JPR 2015 2016 2017
Current Asset 1882256 772855 577089
Current liability 1342472 755133 877359
Current ratio 1.40 1.02 0.66
Oil search 2015 2016 2017
2

Current Asset 1141915 1134038 1287360
Current liability 576599 551837 626776
Current ratio 1.98 2.06 2.05
Interpretation: The above two graphs are indicating liquidity position of both
organization. Graph 1 depicts Jupiter Energy Ltd's position. The ideal ratio is of 2:1 but from
year 2015 to 2016 it ios decreasing because of proportion of current asset and current liability.
The organization is not capable to meet its obligations from its current asset. However, Oil
Search Ltd shows proper position of liquidity as in year 2015 it was in sufficient but in 2016 and
2017, it copes up by 2.06 and 2.05 respectively. The liquidity position of Oil Search Ltd is good
as it can repay its obligations from current asset.
Quick ratio:
JPR 2015 2016 2017
Inventory 68535 17886 18352
Quick Asset 1813721 754969 558737
Current liability 1342472 755133 877359
Quick ratio 1.35 1.00 0.64
3

2015 2016 2017
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
Q uic k ratio
Oil search 2015 2016 2017
Inventory 136786 106817 95018
Quick Asset 1005129 1027221 1192342
Current liability 576599 551837 626776
Quick ratio 1.74 1.86 1.90
2015 2016 2017
1.65
1.70
1.75
1.80
1.85
1.90
1.95
Q uic k ratio
Interpretation: The above graph is depicting quick ratio of both organization. The ideal
ratio is of 1:1. Jupiter Profit Ltd was exceeding as of 1.35: 1 but it started decreasing till 2017
4

which signifies it is not capable to repay its short term obligations from current liability.
However, Oil Search Ltd was in very good position to repay its short term obligations in short
duration from its quick assets. As in year 2015 it was enough but it started raising so it should
keep appropriate watch on its quick assets to utilise it's each resource.
Profitability ratio
 Gross margin ratio:
JPR 2015 2016 2017
Gross profit 417408 0 0
Sales 3896359 0 0
Gross margin ratio 0.107 0 0
2015 2016 2017
0.000
0.020
0.040
0.060
0.080
0.100
0.120
5
G ros s m argin ratio

2015 2016 2017
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
G ros s m argin ratio
Oil Search 2015 2016 2017
Gross profit 803917 464955 730953
Sales 1585728 1235908 1446001
Gross margin ratio 50.70% 37.62% 50.55%
2015 2016 2017
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
G ros s m argin ratio
6

Interpretation: The above graph is depicting gross margin ratio of Jupiter energy Ltd
and Oil Search Ltd. Jupiter energy Ltd is facing very drastic situation as it is facing so many
challenges which are very difficult to face as there is absence of revenue and gross profit as well.
However, there is no competition among both organization. Oil Search Ltd has gross profit of
50.70% which was reduced in 2016 because of gross profit, but it is managed in 2017 to give
proper ratio of gross profit.
 Net Profit ratio:
JPR 2015 2016 2017
Net profit -10982261 -107474870 -8076857
Total assets 76897616 47557048 49200046
Return on asset -14.28% -225.99% -16.42%
2015 2016 2017
-300.00%
-250.00%
-200.00%
-150.00%
-100.00%
-50.00%
0.00%
Net profit ratio
Oil Search 2015 2016 2017
Net profit -39382 89795 302092
Sales 1585728 1235908 1446001
Net profit ratio -2.48% 7.27% 20.89%
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2015 2016 2017
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Net profit ratio
Interpretation: Net profit ratio is termed as very important measure of profitability as
Jupiter energy Ltd is not capable for earning net profit which is moving negative from past three
consecutive years. However, Oil Search Ltd was also not capable to generate net profit in year
2015 but in 2016 and 2017 it started improving and as an outcome it accomplished positive
image. In year 2016 it was 7.27% and in 2017 it was 20.89% which shows that organization is
improving its profitability position (Annual Report of Jupiter Energy Ltd, 2017).
Return on equity:
JPR 2015 2016 2017
Profit after tax -10982261 -107474870 -8076857
Equity share capital 41654900 3711247 -3584203
Net worth 41654900 3711247 -3584203
Return on equity -26.36% -2895.92% -225.35%
Oil Search Ltd 2015 2016 2017
Profit after tax -39382 89795 302092
Equity share capital 4709361 4725316 4937754
Net worth 4709361 4725316 4937754
Return on equity -0.84% 1.90% 6.12%
8

2015 2016 2017
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
Return on equity
Interpretation: The table are indicating return with reference to equity as there is
presence of one graph which is of Oil Search Ltd which has positive return. It was giving
negative return because of less profit after tax but it raised in year 2016 and 2017 by 1.90% and
6.12% respectively. It reflects good indicator as an organizational context. However, Jupiter
Energy Ltd was not capable to earn net profit so his return were in losses (Annual Report of Oil
search Ltd, 2016).
 Return on Asset
JPR 2015 2016 2017
Net profit -10982261 -107474870 -8076857
Total assets 76897616 47557048 49200046
Return on asset -14.28% -225.99% -16.42%
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2015 2016 2017
-250.00%
-200.00%
-150.00%
-100.00%
-50.00%
0.00%
Return on as s et
2015 2016 2017
Net profit -39382 89795 302092
Total assets 10342834 10126129 10512498
Return on asset -0.38% 0.89% 2.87%
2015 2016 2017
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
Return on as s et
10