Oilsearch (OSH) Technical Update

Submitted by Jim Thesiger on 2 May, 2008 - 14:30

Oilsearch (OSH) is perfectly positioned to take advantage of record oil and LNG prices from Australian stockmarket analyst Macquarie Research Equities.

Oilsearch (OSH): The Search for LNG

Macquarie Research (MRE) believes that Oilsearch (OSH) is well-placed to take advantage of record oil prices and underappreciated LNG prices with a 12 month target price for OSH of $6.30. OSH stock gained over 1% to $4.96 during trade this morning and is nearing its all-time high of $5.29. MRE maintain their outperform recommendation with 20% upside potential derived from the PNG LNG Project Joint Venture with ExxonMobil. Crude oil prices retreated a further 1.1% to $112.60 for its third consecutive down day after reaching highs near $120 per barrel during April. The S&P Energy Index (XLE) lost 2.2% overnight due to the combination of a disappointing quarterly earnings report from Exxon Mobil and weaker oil prices.

Oilsearch (OSH) reported first-quarter earnings which were in line with expectations, but down 12% on the previous quarter.

Actions in 2008:

1. The progression of the PBH LNG Joint Venture to Front End Engineering and Design (FEED) and execution of the Gas Agreement as agreed with Sir Michael Somare leading to delivery of PNG Liquefied Natural Gas.
2. Optimal production from the PNG oil fields which are the cash flow generators – 45 million barrels of oil in excess of expectations were produced.
3. An expected improvement in drilling performance which will lead to cost efficiencies.
4. Asset sale of MENA (Middle East North Africa) assets for $200m to Kuwait Energy Company.
5. Other exploration in the MENA region through opportunities in Yemen, Libya, Iraq and Tunisia.

Fundamentals:

 PE Ratio:26 X
 Dividend per share: 8c
 12 month Price target: $6.30

OSH is perfectly positioned to take advantage of record oil and LNG prices.

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