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Oil Search Half year FY19 results – Strong result

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Oil Search (ASX: OSH) is an oil and gas exploration and development company. Oil Search operates oil fields Papua New Guinea (PNG) and has a 29 per cent interest in the ExxonMobil-operated PNG LNG project. Oil Search also has interests in the United States. Oil Search has a market capitalisation of A$9.9 billion.

oil search-1

What are the results from BHP H1 FY19?

Today (Tuesday 20 August 2019) Oil Search released its H1 FY19 results. The main points are as follows:

  • NPAT for H1 FY19 is US$161.9 million, up 105 per cent from FY18.
  • Total production for H1 FY19 is 14.13 mmboe, up 38 per cent from FY18.
  • Total revenue for H1 FY19 is US$776.9 million, up 39 per cent from FY18.
  • Interim dividend of 5.0 US cents (unfranked), up 150 per cent from FY18.

Specific results on company operations are as follows:

  • Total gas produced (gross daily production) for H1 FY19 is 1,095 (mmscf/d), up 42 per cent from FY18.
  • Total PNG oil produced (gross daily production) for H1 FY19 is 9,422 (bopd), up 3 per cent from FY18.
  • Total Liquids produced (gross daily production) for H1 FY19 is 40,072 (bopd), up 24 per cent from FY18.

 

What were the drivers of this result?

The main driver for the positive H1 FY19 result is mainly attributed to the increase in production from oil and gas operations. This represents a 38 per cent increase in total production compared with FY18.

In addition, strong demand for LNG in 1H19 allowed for further sales. There was a 15 per cent increase in LNG demand in 1H FY19 compared with 1H FY18.

 

What is the outlook for Oil Search?

The outlook for Oil search is positive with a number of long-term growth projects in development.

After 12 months of negotiation, Papua LNG Gas Agreement was signed in April 2019. Downstream and Papua upstream pre-FEED effectively complete, FEED contracting well advanced and ready to award FEED contracts. However, there remains uncertainty over the new President of PNG policies towards foreign oil and gas companies and the status of the agreement.

Oil Search found a significant gas discovery at Muruk 2, NW of Hides. Testing has confirmed gas pressure data indicating reservoir continuity to Muruk 1 ST3. An investor update for this resource project is estimated to be announced in the coming months.

 

What is the market reaction?

The initial market reaction to Oil Search H1 FY19 is slightly positive. Oil Search share price is up around 1 per cent and is currently trading at around A$6.57 (1.30pm, 20 August). Oil Search has a P/E ratio in the low twenties and an annual dividend yield of 2.3 per cent (unfranked).

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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