This is what Merrill & Lynch think about OSH from May this year. US$ 4.60 + ?
Recommendation & Risks
In our view, the stock is trading at a big discount. It is on a
P/E of 6.7x and P/CF of 3.7x CY03e. This values Oil
Search at US$4.60/boe based on developed, proven and
probable reserves alone. This is very low given reserves
are over 80% light sweet crude and operating costs are less
than US$6/boe. Nor does this attribute any value for
undeveloped oil discoveries (SE Mananda, Bilip, Paua),
gas or gas liquids.
The outlook for the stock is the best it has been for a long
time, in our view. With an excellent 1Q03 behind it, 2003
earnings now look more secure. There is also some
interesting drilling coming up. The stock price should also
supported by the buy-back that is now underway. We
reckon the only risk is the gas project, despite no value
attributed.
We maintain a Buy recommendation on the stock. Our 12-
month price objective of $1.05ps represents a 10%
discount to our ex-gas valuation. Risks include oil price,
exploration and political/sovereign risk.
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This is what Merrill & Lynch think about OSH from May this year....
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