Oil Search Limited

OSH Details

Recent Update on Papua LNG Project: Oil Search Limited (ASX: OSH) has recently released an announcement with the title “Update on Papua LNG Project in PNG.” In the release, the company’s Managing Director stated that they are encouraged by statement which was made by Minister for Petroleum, named Mr Kerenga Kua, that PNG Cabinet (National Executive Council) has agreed, in principle, to stand behind the Papua LNG Gas Agreement, which was signed by PNG Government as well as the PRL 15 Joint Venture in the month of April 2019. Earlier, the company released the second quarter report for the period ended June 2019 in which it stated that the PNG LNG Project witnessed robust performance despite there was scheduled downtime for the maintenance. Additionally, it was stated that, in June, the Hon James Marape was sworn in as new Prime Minister of PNG, after the resignation of Peter O’Neill. The following picture gives an idea of the Q2 results:

Key Numbers (Source: Company Reports)

The company is having decent footing with respect to its key margins in FY18 as its net margin stood at 22.2%, which is higher than the industry median of 15.9% and, thus, it looks like that the company is possessing the better capability to convert its top-line into the bottom-line.

What To Expect From OSH: Recently, it was stated that the Papua LNG Joint Venture is working collaboratively with PNG Government with regards to finalising National Content Plan for Papua LNG. The plan is aimed at maximising the involvement of PNG citizens and local businesses in the development and operation of Papua LNG Project. At the end of June 2019 quarter, the company has a robust financial position which could help the company moving forward.

Stock Recommendation: In the Q2 report, the company stated that its 2019 1H results are expected to be released on August 20, 2019. The production costs have been anticipated to be in the range of US$12 - 13 per boe for the half year and US$11 - 12 per boe for 2019 full year. Additionally, full year normalised unit production costs, excluding financial impact of earthquake, are anticipated to be in the range of US$9 - 10 per boe. Currently, the stock is priced close to its 52-week low level of $ $6.56 with PE multiple of 21.94x and an annual dividend of 2.14%, proffering a decent opportunity for accumulation. Hence, considering the above-stated facts and current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$7.020 per share (up 0.862% on 14 August 2019).


OSH Daily Technical Chart (Source: Thomson Reuters)
 

Cooper Energy Limited

COE Details

Revenue Growth Driven by New Gas Contracts:Cooper Energy Limited (ASX: COE) is an upstream oil and gas exploration and production company engaged in production and sale of hydrocarbons.

FY19 Financial Results: During the year ended 30 June 2019, the company reported a statutory net loss after tax amounting to $12.1 million, declining on prior year’s net profit after tax of $27.0 million. Underlying profit after tax amounted to $13.3 million, representing an increase of 36% on the previous year’s figure of $9.8 million. During the period, the company reported increased revenue generation from gas supply that contributed to growth in profits. Underlying EBITDA for the period stood at $32.9 million, up 1% from $32.6 million in FY18. 

The company’s sales revenue for FY19 stood at $75.5 million, rising 12% on previous year revenue of $67.5 million. Cash flow from operating activities amounted to $20.5 million, down 8% in comparison to $22.2 million in the previous year.


Key Financial Results (Source: Company Reports)

Outlook & Guidance: The company has issued FY20 work program for the advancement of several projects offering growth from 2020 to 2025.This involves a combination of new gas contracts, offshore Otway basin gas exploration and increased cooper basin drilling. In addition, the company will achieve further growth from 2021/2022 with new projects. For FY20, the company has provided guidance for capital expenditure in the range of $100 million – $110 million.


Capital Expenditure Guidance (Source: Company Reports)

Stock Recommendation: The stock of the company generated returns of 3.77% and 6.80% over a period of 1 month and 3 months, respectively. In addition, the company has a pipeline of new contracts negotiated in 2019, which will deliver the benefit in FY20. The company expects a substantial increase in gas production in FY20 upon the commencement of supply from the Sole gas field. The recently issued 5-year development program has the potential to lift gas production by more than 10 times of FY19 levels. Currently, the stock is priced close to its 52-week high level of $0.595 and has a market capitalisation of ~$891.85 Mn. Hence, in view of aforesaid factors and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $0.545 (down 0.909% on 14 August 2019).


COE Daily Technical Chart (Source: Thomson Reuters) 

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