OSH - Oil Search

[RichKid]

An EW chart of OSH. The extended nature of wave 3 suggests this may be the end of wave 5 (many EW people say that wave 5's are short affairs in such situations) that we've seen recently at the all time high, the falling volume in the past few weeks and previous high volume selling during wave 4 makes me favour that view. However, currently shown is a more bullish view- the lack of high volume sellers this month is what has me in two minds.

Thanks again to Wavepicker for hammering home the fact that a contracting triangle precedes the last move in a sequence. I hope my chart does EW theory some justice, still learning. Used volume again too Nick, really helps to clarify things, assuming I've read it correctly!

 

[Sean K]

RC, If you've read it right, where to from here?

 

[Sean K]

Sorry RK.

 

[moXJO]

OSH

Anyone know why OSH has dropped so much today.I heard about the trouble in PNG prio to today.Has something else happened?

 

[Sean K]

AGL have said it's going to cost heaps more to build the pipeline and want to rejig the project structure somehow.

The market is likely to overshoot the sell off and it could be an opportunity to buy IMO.

 

[Sean K]

Hit bottom at $3.16 and bounced a little. Perhaps the bargains were had....

 

[toc_bat]

Hi kennas,

Havent AGL said that they are shelving the pipeline project for the moment?

Well, anyway, that is what i managed to get out of the latest announcement. I could have misinterpreted the corporate jargon, though .....

bye

 

[rederob]

The market is likely to overshoot the sell off and it could be an opportunity to buy IMO.

Got 3k @ $3.27 coz work kept me away from the 'puter.
All it means is that the extra construction cost will be added to the delivered price of gas after the event.
With dwindling world energy supplies it's hard to conceive the pipeline not going ahead at some time in the future.

 

[Sean K]

OSH management will be very quick to come out with a supportive statement I reckon. They have a very good history of communicating well with the market. Hopefully, it's a positive spin, but realistic too....

OSH really is relying on this to go through, although Yemen exploration is promising. This really is the company maker.

1107 [Dow Jones] STOCK CALL: Oil Search (OSH.AU) off 12.6% to A$3.24 amid serious doubts PNG-Australia Gas project will eventuate. Follows comments from pipeline partner AGL (AGL.AU) about cost blowouts, investment plans. Citigroup keeps sell on AGL following unsurprising FY result, suggests investors switch to Origin (ORG.AU) as "PNG pipeline takes a dive". GSJBW says if PNG-Australia doesn't happen, OSH has less attractive options such as Hides liquid stripping. ORG up 4.9% A$7.44. (IGP)

 

[niknah]

Not enough buyers for the gas right now.

http://www.asx.com.au/asx/statistics/showAnnouncementPDF.do?idsID=00637639

He concludes at the end...

"However, we’re of the firm belief that Australia is the natural economic
destination for PNG gas and we have no reason to believe our PNG gas interests won’t eventually bear fruit."

Is this stock still good to hold long term?


Here're some better news...

http://www.smh.com.au/news/business/png-chiefs-reassure-oil-search-investors/2006/08/13/1155407670452.html
http://www.smh.com.au/news/money/hot-stock--oil-search/2006/08/07/1154802816796.html

 

[Sean K]

I'm holding for the minute. I want to see OSH's response.

 

[Mumbank]

I've been wanting to stock up on these for a while so this is the perfect opportunity. By the time I mucked around a bit, sold some non performers and got organised they were back at $3.38. Still a great buy and hold IMO.
Now lots of buyers jumping in to grab decent sized parcels

 

[Sean K]

Still holding. Missed the cheap stock unfortunately.

MELBOURNE (Dow Jones)--Papua New Guinea-based Oil Search Ltd. (OSH.AU) Wednesday said it's looking at options for its US$2.5 billion plan to pipe gas to Australia from Papua New Guinea after the Australian Gas Light Co. (AGL.AU) said it was scaling back work on the project, due to a lack of customers and rising costs. Oil Search said it believes that the PNG Project remains an economically attractive project, and looks forward to "early resolution of the issues raised by AGL."
It said talks have been held with AGL and its joint venture partner Malaysia's Petronas Gas Bhd. (6033.KU) regarding the various solutions to long-term ownership and "a number of potentially attractive solutions are being matured."
"The release by AGL is clearly an attempt to bring key decisions on project participation and ownership to a rapid outcome," Oil Search said in a statement.
"The project has made progress on moving indicative gas sales agreements with all its customers over the past six months," it added.
Oil Search said the key to the project was the confirmation of final customer loads, especially at the Moomba gas hub.
Oil Search has held talks with Australian oil and gas company Santos Ltd. (STO.AU) over its possible involvement. Santos's re-entry into the project, which it quit 2003, will let the partners expand capacity and gain access to the Moomba hub which supplies the main cities along Australia's eastern and southern seaboard.

 

[rederob]

Guys
The investing rule for a commodity oriented equity is to value it on what it "owns in the ground".
After that work out how much to get it out of the ground and sold.
Clearly the selling price then dictates what it's going to be worth.
With oil and gas there is little chance of prices in the longer term falling back.
Which means that the longer it stays in the ground the more valuable it will be.
While some may have looked at a delay to the PNG as a minus, I was overjoyed. Keep the project on ice for a few more years and see where prices are then.
Frankly, I think all the project partners are keen to get the gas to market and AGL is just trying to get one of the "ownership" aspects relating to Australian delivery hubs "locked down".
What more can I say - "buy the dips"!

 

[TjamesX]

IMO too early to catch this knife....

OSH statement that the project could still go ahead seems a bit desperate. AGL was a major party that has now exited. Project will be delayed significantly - I would wait until this is made official by OSH

TJ

 

[Sean K]

Fat Profits have just bought out a mid week alert and said 'hold'.

Their opinion anyway.

 

[rederob]

IMO too early to catch this knife....

OSH statement that the project could still go ahead seems a bit desperate. AGL was a major party that has now exited. Project will be delayed significantly - I would wait until this is made official by OSH

TJ

A falling knife?
Really?
The stock is presently running at a PE of 14, and had over US$500m in cash and no debt at end June.
This implies there was/is no significant premium built into the share price due to the PNG project.
Moreover, the average price of oil since 1 July is US$10 greater than the annual average price in the year ending 30 June. Thus, we can reasonably assume that if oil stays near at or above present values, OSH will deliver a profit around 15% higher in 2007.

 

[TjamesX]

A falling knife?
Really?
The stock is presently running at a PE of 14, and had over US$500m in cash and no debt at end June.
This implies there was/is no significant premium built into the share price due to the PNG project.
Moreover, the average price of oil since 1 July is US$10 greater than the annual average price in the year ending 30 June. Thus, we can reasonably assume that if oil stays near at or above present values, OSH will deliver a profit around 15% higher in 2007.

I think the project was valued at around 80-100c per share by the brokers. The problem I think is the market perception. If PNG gets delayed significantly then OSH may have to reasses the asset and decide what is the best means of development (LNG etc) but most options will take many many years - so there won't be cashflow for a long time for the gas. The market has already wiped most of the PNG project value.... so from a value perpective it may be fair. But I think there could be more downside if it does become clear that the project could be put on hold.

IMO not a sell for a current holder, but for a prospective holder I think there will be opportunity to asses when OSH strategy becomes more clear. In the short term the market will be completely focused on the PNG project

TJ

 

[michael_selway]

A falling knife?
Really?
The stock is presently running at a PE of 14, and had over US$500m in cash and no debt at end June.
This implies there was/is no significant premium built into the share price due to the PNG project.
Moreover, the average price of oil since 1 July is US$10 greater than the annual average price in the year ending 30 June. Thus, we can reasonably assume that if oil stays near at or above present values, OSH will deliver a profit around 15% higher in 2007.

See the 15% 2007 is already factored in, have to look at 2008 and 2009, will oil prices fall? can they increase production? etc etc

Earnings and Dividends Forecast (cents per share)
2005 2006 2007 2008
EPS 24.3 27.9 28.3 21.5
DPS 9.5 7.9 7.6 8.7

So Foward Terminal of 10 is about $2.20, as a current valuation

thx

MS

 

[rederob]

MS
Using "forecasts" is a bit silly if they are not on the money.
They are just comsec forecasts and I think my record against theirs is close to 100%.
Comsec has stuffed up commodity forecasts for the last 3 years, bigtime.
If they get it right next year it will be because they made a mistake in their actual forecast!
When oil is above $80/barrel later this year, what will the pundits be saying then about oil companies?
I can only say, and keep saying, if you are light on oil, get crude.