Oil Discoveries Reassessed. OSH

[Gator]

LNG developments have been a key value driver for

three years, over-shadowing OSH’s oil exploration

and development activities. As a result, we think

these are heavily discounted by the market and we

address the value implications in this report.

Morgan Stanley report attached.

[admin]

Thanks for that, Gator

[Getitrt2]

Hopefully, those values will help the PNG government with its position in the stock and related obligations.

[Tree]

Thanks for this Gatorbater.

MS Report on OSH is quite interesting.  All within are assumptions based on XOM/OSH finding developing expansion feed-gas in Hides or P'nyang.

With no mention of IOC this OSH update is all about IOC/XOM and Elk/Antelope SA for PNG LNG expansion.

Currently these are the only 2 options for XOM 3rd train expansion.    That is a fact and is predictably being spun in a negative fashion.  

XOM/OSH PNG LNG  current expansion options:

1)  Hides needs further field delineation with over $100 million wells.

2)  P'nyang requires further delineation with expensive wells PLUS a 100 km pipeline to tie into PNG LNG infrastucture.  And there is the problem that P'nyang is not in the PNG LNG project agreements so the partners need to be 'sold' on it's development.

From MS Report on OSH

Investment Thesis

 Long term production growth from LNG train2 1&2 from mid 2014 and full production 2015.

 Third LNG train highly likely with equity gas from either Pnyang or Hides, we assume 2018. Adds 50% to production.     (earlier than 2018 if XOM signs E/A gas)

 Large oil reserves potential in Taza PSC.

Key Value Drivers

 Leverage to oil prices due to oil production and LNG prices which are linked to oil. Spot oil prices materially above our long term base case assumption.

 Falling A$/US$ rate enhances A$ value of US$ cash flows.

 Delivery of PNG LNG on time in H2 2014.

 Third LNG train.

Key risks

 We think a third LNG train is highly likely but there is risk to timeline and budget relative to our expectations

*****

3. First sales of LNG, as distinct from first production are advised in the second half of 2014. We assume August with a gradual build-up to plateau production in 2015 when the second train is sequentially introduced.

Our views on a third LNG are unchanged. We assume one is built, but we risk this assumption and the value we ascribe to it, given there are uncertainties regarding the timing, source of gas, costs and marketing arrangements. We would not expect critical decision on the costs and timing of this expansion to be clarified until late 2014. Our base case valuation assumes a third LNG starts up in early 2018 for incremental capex of US$8bn, including US$5bn for LNG train and US$3bn for upstream development and pipelines.   (XOM 3rd train expansion FEED studies were expected to start in late 2013, though the source of feed-gas is still yet to be determined.  Inclusion of Elk/ntelope gas may change the scope of the expansion.)

Reality is, Exxon has set sights on Elk/Antelope for PNG LNG expansion.  Elk/Antelope gas is not an 'option' for XOM until the SPA is signed.  Keep calm and carry on.

TDWGDASAFP

[jft310]

IBers are paid on the deals they do. This Australian analyst would get paid on an OSH deal but receive nada on an IOC deal. Yes that would influence what he writes. He needs to be perceived as OSH friendly for their next secondary offering. He wants a slice of pie or to get paid. He is hoping for more time so maybe OSH can find more NG is what he wants and to push expansion out so he can do a big stock deal for OSH so he can get paid. Sad buy true.

As to Calio he and his group are paid to do an IOC deal. They has no reason to pimp their research cause stock investors are not in the deal their reward is being in the stock when a deal is announced. Calios reward is the closing of deal. Pimping IOC in a research piece means nothing to Exxon or Shell as to whether they do a deal or not.