Oil Search's third-quarter revenue was down -29% versus the second quarter due to lower realised LNG prices. 2020 capex has been lowered to US$390-US$460m on account of less exploration and rephasing of FEED activities in Alaska.
The broker has increased its net profit estimates for FY20 due to lower than expected exploration expenses and other operating costs.
Morgan Stanley notes Oil Search is very leveraged to higher oil and LNG prices. Also, growth on the Alaska project remains many years away with first production not expected until 2025, which is one of the key challenges faced by the company.
Morgan Stanley remains Equal-weight with a target price of $3.30. Industry view: Cautious.
Target price is $3.30.Current Price is $2.94. Difference: $0.36 - (brackets indicate current price is over target). If OSH meets the Morgan Stanley target it will return approximately 11% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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