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Oil Search still has the superior project

The current squeeze in the world oil price has pushed most structural and fundamental aspects of the energy plays to the fringes, particularly the newly producing Oil Search.

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Oil
Source: Bloomberg

The current rout on the market has ignored the fact that the PNG LNG project is one of the superior gas projects in the Asian region. What is also likely to be a positive for the stock in 2015 is the initial teething issues have now been weaned out.

This will see upside to the consensus view for the following reasons:

  1. LNG expansion is highly likely as the Highlands and Gulf fields continue to shows good drilling returns.
  2. Elk-Antelope is also returning highly encouraging results and the proximity of the field to the PNG LNG platform will make the longevity of the project only increase.
  3. The debottling of Port Moresby is now delivering and, even with the slide in the oil price the increased deliverables, should see OSH at the minimum reaching its targets which creates upside risk.

OSH remains a stock I see with genuine upside in 2015 as the benefits of PNG become more apparent.

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