Stocks’ Details

Oil Search Limited

Interim Dividend to be paid on September 24, 2019: Oil Search Limited (ASX: OSH) is involved in the exploration, development and production for oil and gas fields. The company recently announced that PNG Cabinet (National Executive Council), has completed its review of the Papua LNG Gas Agreement and has validated the Agreement as executed on 9 April 2019. The next step for the proposed integrated three LNG train development is the finalisation of the P’nyang Gas Agreement. Once signed, the PRL 15, PRL 3 and PNG LNG joint ventures can proceed into FEED for this nationally-important development. In another update, the company highlighted that the mooring system at the Oil Search-operated liquids offshore loading facilities in the Gulf of Papua appears to be damaged. Due to adverse weather and sea conditions in the Gulf of Papua, OSH was not able to complete the necessary inspections to fully assess the issue. Consequently, the company temporarily suspended the scheduled liquids loading last week and curtailed production from the Oil Search-operated oil fields.

H1FY19 Key Highlights: Net profit after tax was reported at US$161.9 million, up 105% on US$79.2 million in H1FY18 which was impacted by the Highlands earthquake. This was a strong result, underscored by an excellent performance from the PNG LNG Project, which produced at an annualised rate of 8.6 MTPA for the first half of 2019, despite a two-week partial shut-in for scheduled maintenance.

Total revenue increased by 39.3% to US$776.9 million, driven by higher hydrocarbon sales volumes and an 8% increase in realised LNG and gas prices, partly offset by 9% lower realised oil and condensate prices. The Board of Directors declared an interim unfranked dividend of US 5 cents per share, compared to the 1H18 interim dividend of US 2 cents per share, with record date and payment date on September 4, 2019 and September 24, 2019, respectively.


H1FY19 Key Metrics (Source: Company Reports)

FY19 Guidance: Total production for FY19 has been estimated at 28 – 31 mmboe, where Oil Search operated (PNG oil and gas) has been estimated at 3.2 – 4.4 mmboe and Total PNG LNG Project has been estimated at 25 – 26 mmboe. Under operating costs, the production costs for FY19 has been estimated at US$11.00 – 12.00 per boe. Under capital costs, total exploration and evaluation costs for FY19 has been estimated at US$676 – 726 Mn.

Stock Recommendation: OSH’s share generated a negative YTD return of 3.75%. Its EBITDA margin and net margin for H1FY19 stood at 71.7% and 20.8%, better than the industry median of 36.0% and 18.6%, respectively, implying decent fundamentals of the company. The stock is currently trading close to its 52 weeks low level of $6.300, and therefore, presents an opportunity for accumulation. Hence, considering the aforesaid facts and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $6.900, up 3.293% on September 2019.
 

Senex Energy Limited

FY19 Revenue increased by 34% to $94 million on previous year: Senex Energy Limited (ASX: SXY) is involved in the oil and gas exploration and production. The company recently announced that it has continued to deliver its Surat Basin natural gas development under budget and on schedule, with excellent progress at both Project Atlas and Roma North.In another update, the company has successfully completed the production test of the Gemba-1 gas exploration well in the Cooper Basin, and with the encouraging test results, the company is now focusing on bringing this gas discovery into production and cater the South Australian market by the end of 2019.

FY19 Key Highlights: Total production for the period increased by 43% to 1.2 mmboe, largely due to increasing gas production at Roma North. Sales increased by 34% to $94 million. Underlying EBITDAX increased by 49% to $39 million.Operating cash flow for the period was reported at $45 million, as compared to $5 million in FY18.


Surat Basin 2P gas reserves on June 30, 2019 (Source: Company Reports)

What to expect: As per the release, the company is expected to invest around $150 million in Surat Basin natural gas in FY20, setting the platform for a sharp rise in production, cashflow and earnings from FY21. The Company is determined to complete its Surat Basin drilling campaign in FY20, steadily increasing production, with initial target plateau flow rate of ~18 petajoules a year by the end of FY21.

Stock Recommendation: SXY’s share generated a positive YTD return of 45.28%. Its gross margin for FY19 stood at 56.1%, better than the industry median of 44.3%. Its current ratio for FY19 stood at 3.61x, better than the industry median of 1.25x, which implies that the company is in a better position to address its short-term obligations than its peer group. Its debt to equity for FY19 stood at 0.11x, lower than the industry median of 0.32x. Moreover, EV/Sales multiple on TTM basis stands at 5.2x, lower than the industry median of 19.7x. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.395, up 2.597% on September 4, 2019.

Beach Energy Limited

FY19 Underlying NPAT increased by 86% on previous year: Beach Energy Limited (ASX: BPT) is involved in oil and gas exploration and production. The company operates at five producing basins across Australia and New Zealand and is a key supplier to the Australian East coast gas market. Its portfolio includes the Moomba processing facility and Otway Gas Plant along with suite of high potential exploration prospects.

The company recently announced a change in directors’ interest wherein Richard Joseph Richards offloaded 16,390 shares at $2.3 per share and 25,000 shares at $2.4 per share, taking the final holdings to 188,053 shares.

FY19 Key Highlights: Production for FY19 was reported at 29.4 MMboe, which was an increase of 55% on previous year. Underlying EBITDA for the period was reported at $1,375 million, which was an increase of 80% on previous year. Underlying NPAT for the reported at $560 million, which was an increase of 86% on previous year. Return on Capital employed (ROCE) for the period was reported at 27%, as compared to 19% in FY18. Net cash position at the end of the period was reported at $172 million. The Board of Directors declared a fully franked final dividend of 1 cent per share with record date and payment date on August 30, 2019 and September 30, 2019, respectively.


FY19 Key Metrics (Source: Company Reports)

What to expect: Company’s investment campaign will see approximately $1.5 billion of additional investment over five years, starting in FY20 where 90% of its growth expenditure is projected to generate greater than 50 per cent rates of return.

FY20 Guidance: As per the release, production for FY20 has been estimated at 27 - 29 MMboe. Capital Expenditure for FY20 has been estimated at $750 – 850 million.Underlying EBITDA for FY20 has been estimated at $1.25 - $1.40 billion. Its Victorian Otway Basin campaign will get underway in FY20 with the Black Watch onshore-to-offshore well, the first of as many as 10 drilling opportunities in the next few years ensuring continued supply to the Otway Gas Plant.

Stock Recommendation: BPT’s share generated a positive YTD return of 89.15% and is currently trading close to its 52 weeks high level of $2.480. Hence, considering the aforesaid facts and current trading levels, we recommend an “Expensive” rating on the stock at the current market price of $2.390, down 1.646% on September 4, 2019.


Comparative Price Chart (Source: Thomson Reuters)

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