Oil Search Limited
Oil Search’s strong recovery post challenging conditions: Oil Search Limited (ASX: OSH), an oil and gas company headquartered in Papua New Guinea with offices located in Sydney, and other jurisdictions, holds 29% interest in the PNG LNG Project. Being an outperformer since 2014, the company achieved an average production rate of 8.3 million tonnes per annum (MTPA) last year which was above its capacity of 6.9 MTPA.
OSH was out with exploration and appraisal drilling update of November 2018 for Muruk 2 well with the drilling commencing from 10 November 2018. The objective is to constrain the potential resource volumes in the field. During the month, 13-3/8” inch casing was done at a depth of 1,878 meters.
In December 2018, the company announced about its three new US$100 million each bilateral revolving credit facilities with Commonwealth Bank of Australia, Mizuho Bank Limited, and Sumitomo Mitsui Corporation Sydney Branch with a five-year term which will replace two US$125 million bilateral facility due to expire in December 2018.
As per the latest quarterly updates as at September 2018, the total production was 7.53 mmboe with a 39% increase over the previous quarter. The total sales and revenue were also up by 60% and 81%, respectively. During the quarter, the company achieved an annualized production rate of 8.9 MTPA and 9 MTPA for September. These were the highest rates reported till date. The total revenue was reported at US$474.9 million and the same is the highest since the fourth quarter of 2014. The growth was led by an increase in LNG and gas sales by 68% and liquids sales by 31%. Also, the company realized higher LNG and gas prices by 18% and oil and condensate prices by 5%. The company also reported higher liquidity of US$1.44 billion (up by US$180 million).
.png)
FY18 Earning Guidance (Source: Company reports)
After the recovery from the earthquake, the excellent performance was noted from PNG LNG project, and the company estimates the full year 2018 guidance of total production to lie in the range of 25-26 mmboe against the previous guidance of 24-26 mmboe.The company also estimates its production cost to lie between US$ 11.5-12.5 per boe and the capital cost to go down to US$ 425-475 million which was earlier expected to be around US$ 435-530 million. The company is also expected to spud two wells in January and March 2019.
Over the past three months, the stock is down by almost 18.3%. The price is around its support level of $ 7, and the Relative Strength Index also seems to be in a neutral state with the price reaching towards the lower end of the Bollinger band. Fundamentally, the group is trying to maintain gross margins around 50% while the industry mean is about 51%. With the bottoming of the prices and better performance for the previous quarter and better earnings guidance, the stock seems to be a ‘Buy’ at the current price of $ 7.04, down 2.6% on December 18, 2018.
Origin Energy Limited
Origin shows a decent fundamental outlook: Origin Energy Limited (ASX: ORG) is an Energy company based in Australia. The company is engaged in providing a range of renewable energy options, exploring and producing gas, and power generation through coal, natural gas, and air. Origin Energy focuses on investment opportunities and shareholder distributions and its pre-tax returns on capital employed from its Energy Markets business over the last 5 years has been 9.7%, on an average. The group declared a fully franked 20 cps dividend for FY19. It is aiming to achieve $150m savings by FY21.
Its FY18 results depicted an increase of statutory profit to $218 million. The underlying profit from continuing operations was up $438 million reaching to $838 million. The underlying ROCE from continuing operations and net cash flow from operating and investing activities were up by 3% and 92% respectively. The adjusted net debt went down below $6.5 billion and was reported as $1.6 billion.
It generated output at Eraring of 15.9 TWh with 676 PJ APLNG production and $1.5 billion net proceeds from the asset sales. On the basis of the current political and regulatory environment, ORG’s underlying EBITDA is expected to be lower in the range of $1.5 billion to $1.6 billion for Energy markets due to increased competition and prices. Also, ORG has decided to absorb the 3% electricity price increase in New South Wales from 1 July. However, Australia Pacific LNG FY2019 production is projected to lie between 660-690 PJ with new exploration activities at Beetaloo Basin, NT Ironbark, and Queensland. It is also expected that the APLNG operating breakeven will fall in the range of US$ 22-26/BOE with corporate costs around $65 million and CAPEX of $385-445 million. The company possesses a decent growth opportunity in the LNG market.
However, over the past six months, the stock price has gone down by 28.7%. The stock is breaking its support levels consistently and the RSI does not seem in a positive zone. The price has recently touched its upper level of the Bollinger band. All these indicate some turbulence in the stock price. The group is having gross margins around 20% while the industry mean is about 51%. With the decent fundamental outlook and a fluctuating technical scenario, we give a ‘Hold’ on ORG at the current price of $ 6.85, down 2.6% on December 18, 2018.
.png)
Comparative Price Chart (Source: Thomson Reuters)
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.