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.