Citi on OSH: PNG LNG on track

[Gator]

OSH aims to participate in Elk/Antelope LNG expansion, terms highly uncertain
— We previously estimated the incremental DCF from an Elk/Antelope expansion train
at ~A$0.92/shr for OSH (see note “PNG LNG expansion: a close look at three
emerging scenarios”), assuming OSH could farm-in for 29% equity at A$1/mcf. We also
highlighted a funding risk in this scenario which could dilute the DCF upside. We now
see an emerging scenario where OSH (& STO) are offered a lower equity % in
Elk/Antelope to make room for an InterOil equity stake, a clear objective of InterOil’s
newly appointed CEO, Mike Hessian. While this would lower the funding burden for
OSH, it would also lower the valuation upside from an Elk/Antelope expansion.