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Oil Search Ltd OSH

Rating as of

Morningstar’s Analysis

Valuation
Currency in AUD
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

No-Moat Oil Search Delivers Robust First-Half Cash Flows; No Change to Long-Term Outlook

Mark Taylor Senior Equity Analyst

Analyst Note

| Mark Taylor |

We make no change to our merger fair value estimate of AUD 6.10 for no-moat Oil Search or to our AUD 5.50 intrinsic assessment of the stand-alone entity. The PNG oil and gas producer reported first-half 2021 underlying net profit after tax, up 460% to USD 139 million, ahead of our USD 95 million expectations though off a low base. Lower-than-expected operating costs were the driver of outperformance. We increase our 2021 EPS forecast by 18% to AUD 20 cents and our DPS forecast by 15% to USD 7.40 cents. Oil Search declared an interim USD 3.30 cent dividend, up from zero in the previous corresponding period and ahead of our USD 2.30 cent expectations. The 50% payout ratio was as expected but on the higher earnings.

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Company Profile

Business Description

Oil Search was founded in 1929 and operates all of Papua New Guinea's oilfields. The PNG government holds a 10% interest. Oil Search had successfully run PNG oilfields since assuming operatorship from ExxonMobil in 2003. However, the tyranny of distance saw the large and high-quality gas fields largely stranded until 2014. The PNG LNG project is the first step to monetise those vast gas resources, again under the direction of ExxonMobil. First-stage construction is complete, with potential for expansion from two trains to five.

Contact
Ground Floor, Harbourside East Building, Stanley Esplanade, PO Box 842
Port Moresby, NCD 121, Papua New Guinea
T +675 3225599
Sector Energy
Industry Oil & Gas E&P
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 1,243