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.
OSH Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
