The 20-year-old man was charged with supply indictable quantity prohibited drug and deal with the proceeds of crime, as well as a breach of bail offence after he was arrested in Oyster Cove on Monday.

Port Stephens police had been conducting patrols of Oyster Cove following reports of a grey ute undertaking "dangerous driving behaviour in the area".

About 2.45pm on January 4, police were driving along Oyster Cove Road when they located a grey Holden ute stopped on the side of the road.

Police said two men, aged 20 and 25, had been changing a tyre on the vehicle.

Officers stopped and spoke with two men.

Following further inquiries, police conducted a search of the vehicle where they allegedly located methylamphetamine and more than $2000 in cash.

Police said some of the notes were melted together.

The 20-year-old from Lemon Tree Passage was arrested and taken to Nelson Bay Police Station where he was charged.

He was refused bail and was due to appear in Newcastle Local Court on January 5.