Oil Search Limited Audit Report

This comprehensive report provides a detailed audit of Oil Search Limited, a major oil and gas company. It begins with an executive summary and introduction, followed by a thorough examination of the company's business operations, investment activities, financing, and financial reporting practices. The report then delves into an industry analysis, covering industry size, growth, supply chain, major players, market share, critical success factors, and major threats. A legal and regulatory environment analysis is included, along with an external environmental analysis using PEST, SWOT, and Porter's Five Forces frameworks. The report assesses business risks, performs analytical procedures to understand the entity's performance using ratio analysis, and examines management and governance. The conclusion summarizes the findings and emphasizes the importance of risk management for companies in the energy sector. The report includes financial statements and formulas in the appendix and cites numerous references.

AUDITING
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Contents
EXECUTIVE SUMMARY.............................................................................................................4
INTRODUCTION...........................................................................................................................5
PART 1 UNDERSTANDING NATURE OF ENTITY..................................................................6
Business Operations.....................................................................................................................6
Investment and Investment Activities..........................................................................................6
Financing and Financing Activities.............................................................................................7
Financial Reporting Practices......................................................................................................7
PART 2 UNDERSTANDING THE INDUSTRY...........................................................................9
Industry Size................................................................................................................................9
Industry Growth...........................................................................................................................9
Industry Supply Chain...............................................................................................................10
Major Players in the Industry.....................................................................................................10
Market Shares and Industry Players...........................................................................................11
Critical Success Factors.............................................................................................................12
Major Threats.............................................................................................................................12
PART 3 UNDERSTANDING THE LEGAL ENVIRONMENT..................................................13
PART 4 UNDERSTAND EXTERNAL ENVIRONMENTAL FACTORS.................................14
PEST Analysis...........................................................................................................................14
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SWOT Analysis.........................................................................................................................15
Porter’s Five Forces...................................................................................................................16
PART 5 UNDERSTAND OBJECTIVES, STRATEGIES AND ASSESSING BUSINESS
RISKS............................................................................................................................................17
PART 6: Performing analytical procedure to understand Entities’ Performance..........................19
PART 7 UNDERSTAND MANAGEMENT AND GOVERNANCE..........................................20
CONCLUSION..............................................................................................................................21
REFERENCES..............................................................................................................................23
Appendix........................................................................................................................................26
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EXECUTIVE SUMMARY
Risk analysis is one of the most important aspects required to be focused upon by an
organisation. Analysis of the risk helps the organisations in gathering information related with all
the aspects which could have a huge impact on the progress of it. Oil Search Limited is a largest
oil and gas exploration and development company incorporated in Papua New Guinea which was
founded in 1929. Company is working on a huge level in which it is required that the same
should work towards to gather proper set of information related with the risk factors which could
have a huge impact on the progress and the position of the company in a market. Hence, a report
is developed which will include information related with the risk factors which could occur in
near future and will include information related with why it is required to evaluate all the risk
factors for an organisation.
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INTRODUCTION
Auditing is the aspect which helps in evaluating the key performance indicators of an
organisation. For every organisation working in a competitive market it is required that a proper
focus should be developed towards the risk factors which could have a huge impact on the
business processes (De Marco and Mangano, 2017). It is required that a business should work
towards to gather appropriate set of information related with all the aspects which could affect it
in near future. Gathering relevant set of information will help in developing the strategies with
the effect of which smooth functioning of the business could be guaranteed. Hence, a report is
developed which will help Oil Search Limited in gaining relevant set of information related with
the internal as well as external risk factors which could affect the business processes. The report
will also include analysis of the external as well as internal environmental analysis so that in
depth information related with all the risk factors could be availed (Banumathy and Azhagaiah,
2015). Internal analysis will include SWOT analysis whereas external environmental analysis
will include PESTEL analysis. Internal and external environmental analysis of the business will
be followed by various risk factors which could affect the progress of the business and strategies
will be developed so as to mitigate the risk factors and to ensure that the business could attain
success in managing all the internal as well as external work related process and could manage
its success in the market.
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PART 1 UNDERSTANDING NATURE OF ENTITY
Business Operations
Oil Search Limited is one of the largest oil and gas exploration and development companies
which are incorporated in Papua New Guinea. Company was founded in 1929 and is one of the
largest companies in Papua. Oil Search Limited is indulged in the business of developing and
exploring oil and gas and prefers to supply the same in the market (Bianconi and Yoshino, 2014).
Sales and distribution of oil and gas and various other related products is being done. Company
is working in the international market and handles many of the operations with the effect of
which it could generate effective set of revenue and remain stable in the market. Hence,
managing the production of oil and gas and handling all the operations related with its sale in the
domestic as well as international market is a tough task. It is necessary that all the risk factors
related with the operations of the company should be focused upon by the company and final
decision related with the same should be made (Burgherr and Hirschberg, 2014).
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Investment and Investment Activities
Investment is one of the major aspects which is required to be focused upon by an organisation.
It is necessary that the company which is working on such a huge level should take appropriate
investment decisions. In the same manner Oil Search Limited focus upon such type of decisions
and prefer to assure that appropriate and accurate decisions could be made. Oil Search Limited is
the company which prefers to invest the money in right things and develop a proper and relevant
set of deadline for the return that the company will get by investing the money. Such type of
positive attitude of the company helps the same in making appropriate investment decisions and
ensures that it could sustain in near future (Criscuolo and Menon, 2015). Presently company is
investing in the risk management aspects so as to ensure that all the risk factors could get
removed and sustainability could be obtained.
Financing and Financing Activities
Availability of funds is one of the most important aspects required to be taken into consideration
by the organisations. Financing is the concept which provides a relevant set of support to the
companies working in a competitive world. Financing and financing activities of the companies
helps in developing the understanding with the market from where a company should approach
the funds and the amount of funds required to be invested (De Marco and Mangano, 2017). Oil
Search Limited is the company which ensures that a proper financial framework should be
developed and evaluation of the strategies should be done so that appropriate amount of fund
could be gathered within the required deadlines only.
(Elleithy and Sobh, 2013)
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Above graph is showing the status of the revenue generated by Oil Search Limited each year. It
could be seen that the company has earned an effective amount of revenue every year. But a
downfall in the generation could be seen which requires that company should take appropriate
decisions to develop the strategies and should work towards to manage the things in a proper
way (Energy policies of IEA countries, 2012).
Financial Reporting Practices
Financial reporting is a practice which should be followed in an appropriate way. It is required
that every single entity working in the market should work towards to manage the financial
activities and should try to manage the things in an appropriate way (Fiorenzani, Ravelli and
Edoli, 2012). Working towards to develop a proper financial system will help the companies in
maintaining sustainability and will provide an opportunities to develop a proper and relevant set
of financial plans. Oil Search Limited is a company which ensures that every single entry related
with its fund as well as cash should be recorded in a proper manner and all the records should
show a proper track record of the inflow as well as outflow of the company’s cash.
Balance Sheet in USD
(Furlonge, 2011)
Cash Flow in USD
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(Grandell and Thorenz, 2014)
The above graphs are showing the details related with the financial activities of an organisation.
The graphs will help in developing an understanding with the current financial position of the
company and will provide a better path for the success. Oil Search Limited is the company which
keeps an eye on every single activity of its funds and ensures that it could develop appropriate
strategies in relation with is financial growth and could manage its success in the market
(Harčariková and Šoltés, 2016).
PART 2 UNDERSTANDING THE INDUSTRY
Industry Size
Oil Search Limited is a working in the industry which has a huge potential for growth. For a
company working in such type of industry it is required that the same should take care of every
single aspect which could help it in managing its success and growth in the market (Levine and
Waters, 2012). Oil and gas is the industry which provides ample of opportunities for the growth
and helps the companies in growing. Industry has a huge potential to succeed in the international
market as there are many of the countries which prefer to take oil and gas supplies from other
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countries. Outsourcing is one of the best medium which provides a huge potential for the growth.
Hence, it could be evaluated that by developing appropriate set of plans and by indulging in the
activities.
Industry Growth
A rapid growth could be seen in the market which is helping various companies in making an
effective set of growth (Mathew, 2009). There were various set of ups and downs which were
noticed by oil and gas industries. Long term impact of the downturns was seen in the market of
oil and gas industry was seen. The survival mentality in the oil and gas industry seems to have
resulted in the shift of the mindset towards the shorter cycle projects. Growth in the market of
Oil and gas industry is estimated till 2020 which is good news for the companies working in the
market. In 2014 one of the major challenges faced by the industry was talent. Lack of talent was
affecting the industry growth but with the change in time many of the talented business partners
entered into the market and helped in the sustainability of the same (Muralidhar, 2010). Hence, at
the end it could be seen that industry of oil and gas has a huge potential for growth will provide
an effective set of support to the companies working in it.
Industry Supply Chain
Oil and gas supply chain works on three variables which are up stream, Mid Stream and
Downstream (Rousek, 2010). At the upstream level there are various set of aspects which are
taken into consideration these factors are exploration, field development, production and
operation of the oil and gas. At the midstream level factors which are focused upon by the
industry are transportation, processing, storage and distribution of the products and services
produced by the industry. Lastly at a downstream level manufacturing, refining, petrochemical
wholesale and marketing of the produced product is done. Various supporting industries remain
available in the market which helps in managing the supply chains and Oil Search Limited is one
of the companies which plays a supporting role in managing the supply chains of the industry
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(Sidortsov, 2014).
(Wagner, 2012)
Major Players in the Industry
Oil and Gas is the industry which is growing rapidly in the market (Energy policies of IEA
countries, 2012). There are several major players who are performing effectively in the market
and helping the same in managing the growth of the industry. Some of the major players are:
Apache Corporation
Arrow Energy
Australian Worldwide Exploration Ltd
BHP Billiton Petroleum
Oil Search Limited
These are some of the major players who are performing effectively and are providing relevant
set of help to the oil and gas industry.
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Market Shares and Industry Players
According to the market report it is being evaluated that oil and gas industry holds 10% of the
market share in the market of Australia. Holding a 10% of the market share and ensuring that the
requirement of all the people available in the market could get fulfilled is a tough task
(Balasundaram, 2012). It could be seen that oil and gas is the industry which is providing a
positive response to the market and is helping the people in managing their day to day life in a
proper way.
(Hang et al., 2017)
Critical Success Factors
Oil and gas industry is growing and is providing opportunities to the companies with the effect of
which they can grow in this situation it has become important that the critical success factors
related with the oil and gas industry should be undertaken. These factors are:
 Quality of the reserves and replacement strategy are being followed by the industry so as
to ensure that success could be obtained (Stoutenburg, 2015).
 Diversification is another aspect which is applied by the industry. This helps the industry
in growth aspects and helps in managing things in a proper way.
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