How long have you held Oil Search Limited OSH (market cap $14.7 billion)?
We’ve held an overweight position vs benchmark since August 2011.
What do you like about it?
We like the strong production growth potential that Oil Search offers investors in the energy sector. They have a 29% interest in the ExxonMobil operated PNG LNG Project. The project is now operating at full capacity, following the early completion of the project, which will underpin strong cash flows for the company going forward. In addition, the company has extensive interests in two major gas hubs, the PNG Highlands and the Papuan Basin. The company is pursuing a gas aggregation strategy in the PNG to drive the next phase of LNG development. We believe that a brownfield expansion to the PNG LNG project will provide further strong economic returns for investors given the ability to leverage existing infrastructure.
Oil Search Limited (OSH)
Source: Yahoo!7 Finance, 4 September 2014
How is it better than its competitors?
The company has extensive experience in Papua New Guinea, having been operating in the country since 1929. In addition, with ExxonMobil as the project operator of the PNG LNG project, Oil Search can also leverage the super major’s capabilities.
What do you like about its management?
Experienced senior management and a supportive board have ensured the early completion of the PNG LNG project slightly under budget.
What is your target price?
Around $11 in the next 12 months.
At what point would you sell it?
We will look to review our position once a Final Investment Decision (FID) has been made on some of the company’s growth options.
How much has it added (subtracted) to your overall portfolio over the last 12 months?
Oil Search is up around 15.5% over the past year and not surprisingly has outperformed the broader ASX 200 benchmark, which is up around 14.3% (total return) over the same time period.
Is it a liquid stock?
Yes. It is a very liquid energy stock for both global and domestic investors.
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