Australian Energy Update

Submitted by Jim Thesiger on 20 May, 2008 - 17:34

Here is an Australian Energy update from Australian market analyst UBS.

What do WPL, STO and OSH look like at US$100/bbl oil price parity for LNG?

Is our LT assumption of US$10/mmbtu conservative?:

We have recently upgraded the UBS our oil price forecast by a material amount, but we have left our long term Asia Pacific LNG pricing assumption of US$10/mmbtu unchanged. Is this too conservative?

Asia Pacific LNG prices are moving towards oil price parity:

There is undoubtedly a growing trend over time towards oil parity LNG pricing in the Asia Pacific region (refer: Australasian LNG: A Reality Check, 29 April). What if all new LNG contracts signed by Woodside, Santos and Oil Search are priced at the LNG equivalent of US$100/bbl oil price parity pricing?

Who benefits most at a US$100/bbl equivalent LNG price?:

The Woodside NAV would increase by 13% based on the pricing upside from uncontracted Pluto LNG project volumes, all else held constant. On this same basis, our share price targets would also be driven up by the re-pricing of LNG in uncommitted potential projects. Oil Search would benefit most (SPT +45%), followed by Woodside (SPT +38%) and Santos (SPT +31%).