The promise of a stepped-up dividend policy supported by new production from and cash flow generated by its 29 percent stake in the Papua New Guinea Liquefied Natural Gas (PNG LNG) project is about to become reality–in a significant way–for shareholders of AE Portfolio Aggressive Holding Oil Search Ltd (ASX: OSH, OTC: OISHF, ADR: OISHY).

In prefatory remarks to his presentation to an Oct. 23, 2014, investor day/strategic review update, Oil Search Managing Directed Peter Botten noted that there would be “no surprises.” He then outlined a predictable, stable course that would see Oil Search maximize the still-considerable opportunity available to it in Papua New Guinea and with the expansion of PNG LNG.

Oil Search’s commitment to developing additional LNG trains at PNG was apparent from its acquisition of a 22.835 percent interest in the PRL 15 field containing the Elk/Antelope gas discoveries–the largest undeveloped gas resource in Papua New Guinea–for USD900 million in February 2014.

The meeting’s excitement was generated by the announcement of a new dividend policy.

Oil Search now intends to pay out 35 percent to 50 percent of core net profit after tax (NPAT), which is net profit after tax excluding any material one-off adjustments to income, beginning with the final dividend for 2014.

The magnitude of the increase is in line with expectations; the timing is about six months ahead of when most analysts thought PNG LNG’s promise would start to pay off for shareholders.

Based on full-year 2013 and half-year 2014 core NPAT figures, Oil Search will likely declare a final dividend of USD0.12 per share for 2014 and interim dividend of USD0.12 per share for 2015.

Oil Search’s total oil and gas production in the third quarter of 2014 was 6.67 million barrels of oil equivalent (MMboe), 81 percent higher than in the second quarter of 2014 and nearly four times production in the corresponding period of 2013.

It was an all-time high for the company and was only marginally lower than production for all of 2013.

The significant increase reflected the first full quarter of contributions from PNG LNG.

Oil Search remains on track to deliver 2014 full-year production within the 18 MMboe to 20 MMboe guidance range.

Total revenue for the quarter was USD538.2 million, another company record, 58 percent higher than in the second quarter and more than three times total revenue in the prior corresponding period, helped by higher sales volumes.

Average realized oil and condensate prices fell 10 percent, from USD111.95 per barrel in the second quarter to USD100.67 per barrel, while the average realized LNG and gas price declined by 7 percent, from USD14.41 per million British thermal units to USD13.38 per MMBtu, reflecting a weaker LNG spot market.

Operational focus remains, for very good reasons, squarely on PNG LNG, which was the major subject of the Oct. 23 meeting.

Oil Search has a strong set of gas resources in Papua New Guinea that will support expansion of the number of trains at the existing PNG LNG site or the construction of a second location.

Management noted in its presentation that it already has sufficient gas in its Papua New Guinea portfolio to support two more trains at PNG LNG; modest appraisal success in 2015 would probably push that to three trains.

Management also noted a 10 percent to 15 percent “de-bottleknecking” opportunity at the existing site, which would drive additional output and cash flow.

Oil Search highlighted the low-cost nature of its potential PNG LNG expansions, which will support competitiveness in an environment of declining LNG prices.

A “final investment decision” on PNG LNG expansion probably won’t come until the end of 2016 at the earliest, which demonstrates the fact there remains a great deal of work to do on resource definition and the identification of a financial partner.

It also indicates that a savvy management team’s target range for new PNG LNG production is 2019 to 2022, as the market for contracting LNG to 2018 is soft.

In addition, buyers in key markets such as Japan and South Korea–which are well supplied through 2018–are looking to shorten contracts from the traditional 15 to 20 years to five to 10 years. Such terms would extend competitive advantages for lower-cost developers such as Oil Search.

Management also noted competition from the US, characterizing new projects supported by the North American shale revolution as “speculative proposals” that would bring approximately 70 million metric tons per annum to market by 2025–and leave ample room for competitively priced LNG (USD12 to USD14 per MMBtu delivered) from other regions.

The first quarter of 2015 will be extremely important for Oil Search, with key reports for several of its potential growth drivers due, including a revised resource estimate for the Hides field, which represents approximately 5 trillion cubic feet (Tcf) of the 9 Tcf total gas resources for PNG LNG.

If Hides is materially larger than current estimates suggest it would provide the gas for a low-cost PNG LNG expansion.

Oil Search is also due to submit a development license application by the end of March 2015 for PRL 3, which includes the approximately 2.5 Tcf P’nyang gas discovery. The Papua New Guinea government favors a plan that commercializes P’nyang through a PNG LNG expansion train.

Oil Search is also engaged in arbitration with InterOil Corp (NYSE: IOC) over the latter’s sale of an interest in the Elk/Antelope discovery to Total SA (France: FP, NYSE: TOT). The hearing will determine whether Oil Search has preemptive rights over the PRL 15 stake that InterOil sold to Total.

If Oil Search is successful, it will likely bring Exxon Mobil Corp (NYSE: XOM), the 33.2 percent owner and operator of PNG LNG, into the Elk/Antelope joint venture.

Oil Search wants to use Elk/Antelope for expansion of PNG LNG, while InterOil and Total favor a second, stand-alone facility.

A hearing on the matter will take place later this month in London, with a decision due during the first quarter of 2015.

Oil Search is actually in a strong position to weather the current slide in oil prices, to which LNG prices are tightly linked.

High capital expenditure commitments to counter, in many cases, high decline rates and substantial dividend and buyback commitments could eat into cash flow for many global producers with oil at or below USD80 per barrel.

Oil Search, meanwhile, has a strong balance sheet and a low-cost exploration and production profile. Early, expectations-beating success at PNG LNG is also generating a substantial cash flow boost via long-term contracts with locked-in pricing that won’t be impacted by the current commodity slide.

Oil Search has a hard-to-match platform of assets, production, revenue base, balance sheet strength and identified growth opportunities to drive significant outperformance versus its global E&P peers over the next five years.

There’s sufficient gas discovered in its existing licenses in Papua New Guinea to support at least two and possibly three LNG trains. Many of the pieces that will bring those projects to reality are in play, and over the next 12 months we’ll see those chips played out.

In the meantime, Oil Search is about to step up to an annualized dividend rate of AUD0.24 from AUD0.04. Based on a recent closing price of AUD8.35 the new dividend rate works out to a yield of 2.9 percent.

That’s pretty good compensation for the well-managed and low-intensity risks ahead.

Oil Search is a buy under USD9 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 USD90.

Oil Search closed at AUD8.35 on the ASX on Nov. 13, approximately USD7.28 based on the prevailing Australian dollar-US dollar exchange rate. It last traded at USD7.29 under the symbol OISHF on the US OTC market. The ADR last traded at USD74.21.

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 declared an interim dividend for 2014 of AUD0.02 per share on Aug. 19, 2014. It was paid on Oct. 7, 2014, to shareholders of record as of Sept. 11. Shares traded ex-dividend as of Sept. 9.

Oil Search will likely declare a final dividend in respect of 2014 on or about Feb. 26, 2015, when it reports full-year financial and operating results. It will likely be paid on or about April 7, 2015, to shareholders of record on or about March 12, 2015. Shares will likely trade ex-dividend as of March 5, 2015.

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 19 analysts that cover the stock, 12 rate it a “buy” according to Bloomberg’s standardization of brokerage house recommendation terminology. There are five “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 AUD10.18, with a high of AUD11 and a low of AUD9.23.

Based on a AUD8.35 Nov. 13, 2014, closing price and a current annualized dividend rate of AUD0.04 per share, upside from here over the next 12 months is approximately 22.4 percent.

Keep in mind that Oil Search will likely declare a final dividend for 2014 of AUD0.12 per share in February 2015, with the interim dividend to be declared in August 2015 likely at that level as well.