broker recomendations

Hi all,

Just a couple of broker recomendations to read if you haven't already. One from Ord Minnet (today) the other Commsec (last week).


ORD MINNET

Beach Petroleum (BPT – A$1.31), Accumulate (upgrade)
Share price underperformance and Tipton West upside

Since 16 April, Beach has underperformed the ASX-200 energy index by 9% and the ASX-200 by 2%. The strong performance of energy stocks over this period has been driven by 1) surging oil prices, and 2) M&A activity in the sector, including the BG offer for Origin, which has generated an uplift in interest in companies with CSM acreage. We feel that Beach should have responded positively to both of these events, it has strong earnings leverage to oil prices given its relatively high cost base and it has exposure to Tipton West which has recently shown very encouraging results from pilots targeting the deeper Taroom measures. We have upgraded our FY09 earnings by 7% based on an increased production rate from BMG oil given the strong production test results from the Basker-6 sidetrack. We have increased our base case DCF valuation to A$1.51/shr due to the positive effect of an increased upside valuation for the Tipton West asset, partially offset by a net reduction in value for BMG oil. We believe there is downside risk to BMG reserves and have factored in a 20% downgrade. We model an upside case for Tipton West based on the production of 2,800 PJ (gross), we value this scenario at A$0.97/shr which we risk weight at 25% given the uncertainties associated with commercialising this amount of gas. We are upgrading our recommendation to Accumulate. Beach is trading at a 13% discount to our base case DCF valuation which is now good value oil price exposure relative to others in our coverage which have run hard with M&A activity and oil prices.


COMMSEC

Beach Pet roleum (BPT): Delhi, COP, CSM and BMG
08/05/08
Last Traded: $1.26 Market Cap: $1.123b Sector: Energy
BUY / OUT PERFORM Valuation: $1.26

Analysis - What has happened?
CommSec provided an update on Beach Petroleum (BPT) recently. Since then:
�� BG’s bid for ORG1 has highlighted the value of Coal Seam Methane (CSM), especially the value in contingent resources and resource extensions.
�� The Basker 6 well has been drilled, unsuccessfully, while the Basker 6 st1 has been successful.
�� BPT’s March quarterly report, showed reserves for the Delhi assets increasing by 1.1Mboe, despite production of 7.1Mboe in 2007.

Outlook - CommSec’s valuation revised down
CommSec has reviewed its valuation of BPT; we have taken a harsher view of Cooper Basin costs and sustaining capital. CommSec’s revision has enabled us to match our asset valuations against available benchmarks.
As a result CommSec’s base case valuation has been reduced to $1.60. This valuation does not recognise the value in BPT’s CSM interests, despite the bid by BG showing that both the value and the volume of CSM is greater than recognised in the equity market.

CommSec’s recommendation retained:
CommSec’s downside case valuation has been revised down, to $1.26, which is in line with the current share price. CommSec’s base case is still a significant premium to the share price, while CommSec’s downside case is in line with the share price.
Accordingly, CommSec retains its BUY / OUT PERFORM recommendation on BPT


Cheers