January 29, 2015

Oil Search Ltd.

Low costs insulate low oil

What's Changed

Price Target

A$7.75 to A$8.17

OSH’s December activity report shows excellent

operational performance from PNG LNG with

production trending up and costs down. With

minimal near-term capex commitments, OSH is well

placed to cope with a period of low oil prices.

OSH’s December quarter activities report

exceeded

our expectations with both production and revenue

higher than our forecasts, and unit costs and tax rates at

the low end of previously guided ranges. These

underpin positive earnings and valuation revisions

detailed in this report.

Profitability over the outlook will depend on oil

prices, despite production growth in 2015. The guided

range is 26-28 mboe (2014: 19.3mboe) and reflects a

full year of LNG output. Our estimate is 27.3 mboe. In

Q4, OSH was free-cash flow positive, and net debt fell

marginally but continuation of FCF into 2015 depends

on higher oil prices, and /or lower costs.

Low costs are an insulator

. We calculate EBIT

break-even over the outlook of US$41/bbl. Cash and

liquidity of US$1.56B provide a buffer for up to 5 years

should $48/bbl oil prevail that long.

LNG expansion is the core priority targeting up to

an additional 3 trains

. P’nyang is progressing toward a

development to feed train 3 and FID likely in 2017.

Timing of “Gulf LNG”, will depend on the outcome of the

current drilling campaign at Antelope which we think will

extend into to year end. OSH’s position in this project will

be better understood shortly, with the outcome of

arbitration into the InterOil-Total transaction expected

this quarter. In any event, capex for LNG expansions

won’t be material until 2017 at the earliest, in our view.

Reiterate EW rating with price target up from $7.75 to

$8.17, in-line with the increase in DCF. EPS up 7-19%.

The delay may explain why the pps is down. The market may think AD is needed  to prove enough resource. My opinion  they now are going for three trains . I think it is possible they wanted another partner for three trains. Just my opinion that three trains is more than what Total wanted right now. Three trains is worth the wait. I am getting better  at this waiting, must be  the patience I have learned owning IOC.

'calvin grad' pid='54540' datel Wrote:

The delay may explain why the pps is down. The market may think AD is needed  to prove enough resource. My opinion  they now are going for three trains . I think it is possible they wanted another partner for three trains. Just my opinion that three trains is more than what Total wanted right now. Three trains is worth the wait. I am getting better  at this waiting, must be  the patience I have learned owning IOC.

Ah grasshopper, many here waiting champions there are.

Little doubt in my mind there's plenty of gas for more than two trains, we only need material progress though on two to move the market price.  A major cash infusion would do the trick.  Is it too early to wish for a Merry Christmas?

I don't know everything like others on this board. I said it was my opinion . Even super majors have limited funds. How much would Total need to fund three trains.? 7 billion? Do they want that many eggs in one basket? I doubt it .it was my impression that Total  really did not want all of the percentage initially. Total has never made a big deal of  EA.  Does a third train bring the cost down .50.? Maybe total would rather have 28 percent of three trains with a cost of 7.50 than two trains with a cost of  8.00. In this time of trimming down I bet they appreciate having a place where people can be assigned. I love you too Getit .

'calvin grad' pid='54550' datel Wrote:

I don't know everything like others on this board. I said it was my opinion . Even super majors have limited funds. How much would Total need to fund three trains.? 7 billion? Do they want that many eggs in one basket? I doubt it .it was my impression that Total  really did not want all of the percentage initially. Total has never made a big deal of  EA.  Does a third train bring the cost down .50.? Maybe total would rather have 28 percent of three trains with a cost of 7.50 than two trains with a cost of  8.00. In this time of trimming down I bet they appreciate having a place where people can be assigned. I love you too Getit .

Why don't you just stick to trying to ask informed questions about things you have read or researched for a while, and try to stop speculating and expressing uninformed opinions about things you know or understand so little about, and I'll try to stop "peaing on" you, as jft falsely charges me of doing "on everyone"!  Sorry if you feel that way.  What are you trying to accomplish?  This is not helping anyone, and you will get little response to such.

(01-30-2015, 10:10 AM)Getitrt2 Wrote:

(01-30-2015, 06:51 AM)calvin grad Wrote:

I don't know everything like others on this board. I said it was my opinion . Even super majors have limited funds. How much would Total need to fund three trains.? 7 billion? Do they want that many eggs in one basket? I doubt it .it was my impression that Total  really did not want all of the percentage initially. Total has never made a big deal of  EA.  Does a third train bring the cost down .50.? Maybe total would rather have 28 percent of three trains with a cost of 7.50 than two trains with a cost of  8.00. In this time of trimming down I bet they appreciate having a place where people can be assigned. I love you too Getit .

Why don't you just stick to trying to ask informed questions about things you have read or researched for a while, and try to stop speculating and expressing uninformed opinions about things you know or understand so little about, and I'll try to stop "peaing on" you, as jft falsely charges me of doing "on everyone"!  Sorry if you feel that way.  What are you trying to accomplish?  This is not helping anyone, and you will get little response to such.

Interesting statements you made Getit. I support what you said ... except that you should have corrected JTF and told him that it's spelled "pee"

Here's my take:  There are several SHU posters who are closet shorts and want to strike fear in the hearts of longs. It's been working for a long time!

Take a look at all the posts by this fellow Calvin Grad and decide whether he is one. Lots of questions from this guy that are aimed at getting readers to second guess. None of his posts are logical. This one, for example, is hard to comprehend because if TOTAL sells off a meaningful percentage of PRL 15 ownership then IOC will become the largest stakeholder and will take over as the Operator. The PNG Government said that's a NO NO.

Look at posts by some of the folks who claim to work for Super Majors and cry about drilling results. There was speculation that Shell did all they could to drive IOC out of PNG for a song; they failed. To my view, ExxonMobil and TOTAL now want IOC gone at a low ball valuation. Hopefully they will also fail. Perhaps the Super Major employees on SHU have an agenda??

Look at some posts that talk about an imminent takeover at $60 ,with timelines that keep slipping. What's their motive?

I can go on.

Yes, they're all allowed to state their opinions on SHU (as are you and me and JFT). It's up to the readers to then recognize the patterns and motivations and respond accordingly. Which you and I also try to do.

My motive is to try my best to inform what I know and speculate on what I don't know but believe to be true. Sometimes I'm wrong. That's when what I thought to be TRUE becomes DRIVEL