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OSH $7.39

for all you osh fans....

  1. Yak

    13,672 posts.
    .....Macca's view today:

    Oil Search Recommendation change

    Oil Search has announced that the PNG gas project participants have reached conditional
    agreement with energy retailer TXU for the sale of gas over a period of 20 years.
    We believe that for the PNG gas project to get the go ahead, the participants require contracts
    supplying 135PJ of gas. AGL has signed up for 50PJ, CS Energy has signed for 15PJ and
    now TXU has signed 20-35PJ. The project requires at least another 35PJ and potentially
    another 50PJ.
    The remaining amount will depend upon striking a deal with Energex/Comalco. Energex has
    stated that this load is between 40PJ and 60PJ. If Energex/Comalco are willing to take 50PJ,
    then the project will get over the line.
    However, time is of the essence. Exxon Mobil will undertake the binding board decision for the
    go-ahead for the whole gas project on 20 January 2003. We also understand that the 50PJ bid
    from AGL will expire on that day. If no deal is signed by then, then all bets are off.
    The PNG gas project is worth $250m or 22 cents per share for Oil Search. We are still of the
    belief that the likelihood of the deal going ahead is less than 50% and therefore retain our
    valuation of $0.72. This valuation would rise to $0.94 with the gas project.
    We recognise that the risk in the short-term is that the share price could go up on speculation
    or confirmation of the deal. We have therefore increased our short-term recommendation to
    Hold.
    Over the longer term, however, exploration activity is required to replace existing production
    and drive value. Oil Search needs to achieve significant reductions in operating and drilling
    costs, greater and more continuous drilling programmes and further modification of financial
    issues to drive the business forward. Therefore we maintain our long term Underperform
    recommendation.

    ASX Code:
    OSH
    Share Price:
    $0.76
    Short term:
    Hold
    Long term:
    Underperform
    Risk factor:
    High

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