OSH’s first year of LNG production evidences low operating costs, high operating margins, and FCF to deliver the next suite of organic growth. We upgrade to OW and add the stock to Morgan Stanley’s Asia Pacific Best Ideas list.
PNG LNG is delivering low-cost production in less than a year from start-up, with operational improvement over the outlook likely. DPS growth in 2014 follows EPS and FCF growth, but more important, in our view, is the growth in gas resources and strong financial position to organically fund up to another three trains.
Key to LNG growth is gas reserves. There appears to be enough to underpin another two LNG trains, with 2015 pivotal in proving and expanding the figure to underwrite a third train. Recent events increase our conviction these LNG expansions will occur. Appointment of Total S.A. to operatorship of PRL15, is a decisive move toward another LNG development in which OSH has material equity, while Exxon’s undertaking to develop the P’nyang gas field also makes a third train at PNG LNG almost certain, in our view.
We think the share price will continue to perform long term as these projects gain momentum. With the PNG LNG project now in cash-generating mode, we think it is timely to revisit the longer-term growth opportunity, consider funding implications in a low oil price environment, and reassess our static gas valuation. Importantly, analysis in this report shows that OSH can organically fund an ambitious three- LNG-train expansion without recourse to equity or risk to dividends, for long-term oil prices at US$85/bbl or greater.
The result is in increase in our SoP from A$8.60 to A$10.14. We raise our price target from A$8.17 to A$9.60 and upgrade our recommendation to OW.
Thanks Gator. Interesting isn't it what they say about what a difference the LNG cash flow is making for OSH. Low cost production (still higher than what Gulf LNG will have) is providing cash enough to give OSH many options including expansion and increased dividends. LT that's what IOC should have. Should.
I still believe that part of the Dispute tactic by OSH was to delay things until P'nyang was closer to development. In reading the OSH annual report and narrative it states what I've said before; this formation has yet to be drilled. Hopes are high, but they were for the offshore formations, the possible Tri extension and others also. But as we've discussed here before; OSH/XOM have been without a major find for quite a while. XOM is very optimistic about P'nyang, but the proof is in the drilling.
So now we have all of this happening at roughly the same time. The delineation of Ant and the drilling O&G P'nyang. If (as it is looking more and more) Ant not only has enough for 2 trains and a certain (with Total as Operator) new 2-train startup LNG project, but 3 trains of very low cost gas, things could get interesting. And we'll see some of the true colors of OSH. One well drilled in P'nyang is as good as one well originally drilled in Ant; still a ways away from "proving" anything up. But wells 4, 5 and probably 6 in Ant bring a lot more certainty.
All depends on how quickly XOM wants to add that 3rd train at PNG LNG.
But what a difference project cash flow is making in OSH's LT future.
'jft310' pid='55641' datel Wrote:Hello OSH we have a rig you can use , slightly used , might have small fires , a broken strut but you gonna love it .
I believe Ant-4 is being drilling with a contract rig with a contract crew. After the small fire and the broken struct IOC must have considered terminating the contract with cause.
03-05-2015, 01:17 PM (This post was last modified: 03-05-2015, 01:20 PM by Stavros.)
Thylacine-2:
You should contact IOC Investor Relations for clarifications as I did (per many others on the SHU Board, I find them to be available and willing too respond two questions, comments and suggestions).
They said:
+ The flash fire was small/contained and extinguished immediately. They deemed it two be standard operating outcomes and not a material event that required disclosure.
+ The strut was repaired within a few hours (far less than one day). Likewise they determined this to be a typical drilling occurrence.
+ Government approvals to re-commence drilling took many weeks. Again, they did not deem the delay to be material. The reason is that Antelope-4 is not on the critical path schedule for testing and certification
A few more details .
A pipe welders flare ignited some loose debris by mistake and the Fire was quickly put out . That's not material .
A rig strut broke and was repaired in hours not days . That's not material .
For safety reasons the drilling was shut down as prescribed under any basic safety program including this one. The govt was notified.
In order to resume drilling requires govt approval which was required under govt rules .
Govt approval was expected anyday or very quickly but it dragged on and on .the govt kept saying anyday.
Please point the finger at the govt for this delay not Interoil .
Additionally This is an old rig that's seems ready for retirement .
These details are from the IR dept which everyone on this board has access to with a simple call or email.
Stavros has this one nailed .
Except for one thing. Wahoo was shut down for safety reasons and it was eventually disclosed. Shutting down drilling on an appraisal well which will help decide Certification volume and payments is a material item. OSH felt it was material to its shareholders and as Operator IOC is not only responsible to its own shareholders but to those of OSH and Total. They should have at least laid out the facts and let it be known that they were waiting on the government to give them the "go" on starting drilling back up.
When shareholders and markets hear no progress on a long-awaited well, they think the worst. No need for that. They are very quick to announce checks for medical ships and for fighting HIV-AIDS; drilling news is just a little more sensitive news.
Per IR they expected it any day . Since it will take several wells for tbe certification to be complete a delay in the earliest well , time wise well ahead of the others they might have considered it material if it delayed the certification which it clearly was not doing .
I assume Monday QB time again they would have preferred now to have said something but in the middle of it all they per the govt were getting word anyday is what I was told .
Not knowing all the details of the situation and making judgements is fraught with risk for the judges .
In my opinion Hession is keeping tight lips until we get the resource payment . He sees the window that everyone sees between the asset size known and receipt of payment in my judgement . He wants an independent company which will maximize shareholder value in the long term .
