AE Portfolio Aggressive Holding Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY) is an increasingly valuable oil and gas property, with significant, identifiable and realistic production and revenue upside.

The company’s short-, medium- and long-term potential is well known to bigger players in the global exploration and production space. And a specific event related to financing activity by one of the company’s major shareholders could drive immediate upside for the stock.

At the same time, this investor is working to ensure that any exit in the short term is driven by an offer that reflects the substantial long-term value embedded in Oil Search.

Management raised its 2014 production guidance after 2013 production exceeded forecasts and beat 2012 results. Production for the fourth quarter of 2013 was down slightly compared to the fourth quarter of 2012.

Full-year 2013 production was 6.74 million barrels of oil equivalent (MMboe), slightly above the 6.2 to 6.7 MMboe guidance range and 6 percent higher than full-year 2012 output of 6.38 MMboe.

Total revenue for 2013 was USD766.3 million, up 6 percent from USD724.6 million in 2012, as Oil Search benefited from strong global oil prices during the quarter, realizing an average price of USD113.33 per barrel.

Production for the fourth quarter of 2013 was 1.77 MMboe, down from the 1.79 MMboe for the prior corresponding period. Revenue for the three months ended Dec. 31, 2013, was down 3.8 percent to USD210 million from USD218.2 million a year ago.

As of Dec. 31, 2013, the USD19 billion Papua New Guinea Liquefied Natural Gas ( PNG LNG) project was more than 90 percent complete and remained on budget, with first LNG sales on track for the second half of 2014.

Commissioning activities continued during the fourth quarter, with the introduction of gas from the Kutubu field into the Hides Gas Conditioning Plant in December, which management described as “a major milestone.”

And work by the PRL 3 joint venture continued on the potential development of the P’nyang field as a resource for PNG LNG expansion.

Management previously reported that scoping studies are expected to continue through 2014 in preparation for the submission of a development license application for the field in early 2015. Seismic programs over P’nyang as well as the adjacent Juha field, which had been suspended due to the wet weather season, started up again during the fourth quarter.

Oil Search also reported that updated guidance from PNG LNG operator Exxon Mobil Corp (NYSE: XOM) suggests first production from the project will occur during the first half of 2014.

And output is likely to fall between 5.7 and 8.2 MMboe net to Oil Search for calendar 2014. Oil Search issued initial 2014 PNG LNG production guidance of 3.8 to 6.3 MMboe in late 2013.

Annual PNG LNG output net to Oil Search is likely to approximate 21 MMboe.

Based on updated information from Exxon about the project’s progress, Oil Search upped its production guidance for 2014 to 12 MMboe to 15 MMboe from 10 MMboe to 13 MMboe.

It is in fact a rarity for an operator to offer a positive update for an LNG project.

One March 2011 study found that for LNG projects completed between 2000 and 2010 only 29 percent were completed ahead of schedule, by an average of four months, while 34 percent were completed late, by an average of nine months. Another 24 percent of projects experienced material post-commissioning issues, with an average of four months lost production within the first year of operation.

The safe assumption is that Exxon’s startup date will be refined over the course of the first half of 2014. But for now PNG LNG is moving in the right direction.

There is another developing situation that could prompt a bid for part or all of Oil Search and that catalyzes an upward spike for its share price.

The Papua New Guinea government is planning to raise AUD1.68 billion to pay off a bond linked to its strategic stake in Oil Search it issued to Abu Dhabi in 2009.

Papua New Guinea issued the five-year bond Abu Dhabi’s sovereign wealth fund International Petroleum Investment Co (IPIC) at the height of the global financial crisis to help it cover its share of the development costs of PNG LNG.

If Papua New Guinea doesn’t refinance the bond by March 2014 IPIC will claim the rights to the government’s 14.6 percent stake in Oil Search at a strike price of AUD8.55 per share.

The Papua New Guinea government may be willing to sell its stake in Oil Search as well as its 16.8 percent direct stake in the PNG LNG project should an entity with an interest in Oil Search make a suitable offer.

The move could be the first step toward bringing Oil Search into play, with potential suitors now needing to court only the PNG government to gain a foothold in the AUD11 billion company.

Super Oils Royal Dutch Shell Plc (London: RDSA, NYSE: RDS/A) and Total SA (France: FP, NYSE: TOT) as well as Australia-based Woodside Petroleum Ltd (ASX: WPL, OTC: WOPEF, ADR: WOPEY) have been identified in the financial press as potential suitors for Oil Search.

Oil Search’s 29 percent stake in the PNG LNG project is the object of potential suitors’ ardor.

In December 2013 Total bought stakes in InterOil Corp’s (NYSE: IOC) licenses in the Elk and Antelope gas fields in Papua New Guinea in a deal worth up to USD3.6 billion. Elk and Antelope could provide the feedstock for a new LNG project in Papua New Guinea or for the expansion of PNG LNG.

Oil Search management noted in its fourth-quarter and full-year 2013 production statement that discussions were ongoing during the quarter regarding the company’s potential involvement in PRL 15 in Papua New Guinea, which contains the Elk and Antelope gas fields.

Shell’s interest is more general, while Woodside is looking for new drivers for production growth after bringing its Pluto LNG project online in 2013.

It will take a significant offer, one that values Oil Search in the neighborhood of AUD14 billion, as the Papua New Guinea government expects Oil Search’s share price to approach AUD20 per share by 2020.

By that time the PNG LNG project will be producing and may have expanded its output capacity, and Oil Search’s oil exploration efforts in Papua New Guinea and Iraq’s Kurdistan region may also be in production.

Two high-potential oil appraisal wells commenced drilling in December 2013, with the spudding of Mananda 7 in the PNG Highlands and Taza 2 in Kurdistan.

Oil Search spent USD392.6 million on exploration, development and production activities, of which USD307.4 million was related to PNG LNG. Spending was funded by cash, operating cash flows and drawdowns from the PNG LNG project finance facility and the company’s corporate debt facility.

As of Dec. 31, 2013, Oil Search held USD210 million in cash and had USD300 million in undrawn credit, for total liquidity of USD510 million.

Total debt was USD4.02 billion as of Dec. 31, 2013, including USD3.82 billion drawn on the PNG LNG project finance facility and USD200 million from the company’s USD500 million corporate facility.

Management will report full financial and operating results for 2013 on Feb. 25, 2014.

Normalized cash operating costs are expected to be within the previously advised guidance range of US24 to USD26 per barrel of oil equivalent (boe). Additional cash costs related to Hides gas purchase costs are expected to total approximately USD37 million.

Non-cash charges, comprising depreciation, amortization and site restoration, are forecast to be between USD7 and USD7.50 per boe, slightly below the previous US7.50-to-USD8.50 per boe guidance range.

Management expects 2014 cash operating costs of USD23 to USD28 per boe. Hides costs are expected to be between USD37 million and USD40 million, with non-cash charges of USD14 to USD16 per boe.

It should be noted that, due to the high level of fixed costs associated with PNG LNG, operating costs on a per barrel basis are very sensitive to the project start-up date and ramp-up profile. Management expects operating costs per barrel to decline significantly once PNG LNG production plateaus and the LNG plant is working at full capacity.

Oil Search’s initial capital spending budget is USD1.215 billion to USD1.495 billion.

Assuming its refinancing efforts proceed–and there was significant competition among investment banks to win the advisory contract–as planned, this is a win-win for the Papua New Guinea government and for Oil Search investors in general.

There’s a very narrow window of opportunity for bigger players to maneuver a compelling offer through because should Papua New Guinea preserve its current ownership standing the long-term payoff will be substantial.

The consensus among analysts is that Oil Search’s earnings will more than quadruple to AUD791 million over the next two years alone. And management has indicated that PNG LNG will drive a stepped-up dividend policy.

Oil Search is a buy under USD8 on the ASX using the symbol OSH and on the US over-the-counter (OTC) market using the symbol OISHF.

Oil Search also trades as an American Depositary Receipt (ADR) on the US OTC market under the symbol OISHY. Oil Search’s ADR represents 10 underlying shares traded on the ASX and is a buy under USD80.

Oil Search closed at AUD8.31 on the ASX on Feb. 13, approximately USD7.47 based on the prevailing Australian dollar-US dollar exchange rate. It last traded at USD7.40 under the symbol OISHF on the US OTC market. The ADR last traded at USD75.26, surging from USD69.43 on Feb. 3.

Oil Search’s financial year corresponds with the calendar year, Jan. 1 to Dec. 31. The company reports full financial and operating results twice a year; it typically posts first-half results in late-February, with full fiscal year numbers out in late-August.

As for its regular dividend schedule, Oil Search is on track to declare a final dividend of AUD0.02 per share on Feb. 25, 2014. It will likely be paid on or about April 8, 2014, to shareholders of record as of March 13. Shares will likely trade ex-dividend as of March 6.

An interim dividend of AUD0.02 was declared Aug. 20, 2013. It was paid Oct. 8, 2013, to shareholders of record as of Sept. 12, 2013. Shares traded ex-dividend on this declaration as of Sept. 6, 2013.

Dividends paid by Oil Search are “qualified” for US tax purposes. Based on the “fiscal cliff” compromise reached in Washington, DC, in early January dividends will be taxed at Bush-era rates of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

The Australian government withholds 5 percent to 15 percent, based on the US-Australia tax treaty on double taxation. The two countries have not taken the step of eliminating withholding from dividends paid in respect of shares held in a US IRA, as have the US and Canada.

Among the analysts who cover the stock, 13 rate it a “buy” according to Bloomberg’s standardization of brokerage house recommendation terminology. There are two “hold” and two “sell” ratings on the stock at present. The “best consensus” 12-month target price among the 13 analysts that provide such a number is AUD9.82, with a high of AUD10.25 and a low of AUD7.23.