First quarter production was in line with UBS estimates. Revenue was marginally lower than expected because of reduced volumes from PNG LNG. Realised LNG prices outperformed peers in the quarter, the broker notes.
2021 guidance has been revised, with capital expenditure reduced by -28% as expenditure on the biomass project and seismic analysis in PNG are deferred. Yet operating cost guidance has been revised up 35% because of higher hedging costs.
UBS upgrades to Buy from Neutral, assessing the outlook for oil demand is improving and Oil Search has the highest leverage to a forecast oil price recovery. Target is reduced to $4.50 from $4.60.
Sector: Energy.
Target price is $4.50.Current Price is $3.77. Difference: $0.73 – (brackets indicate current price is over target). If OSH meets the UBS target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
