Oil Search will exercise its option to increase its equity interest in the Alaskan assets to 51% from 25%. Citi currently expects the company will need to raise US$200-500m in new equity in 2020, depending on the tolerance for corporate debt and discretionary expenditure.
If the company does not farm down Alaska, it will have to incur 51% of the capital expenditure in addition to LNG expansion.
Citi considers the stock fair value and retains a Sell rating, suspecting equity markets are being too dismissive of the risks in LNG, including price reviews for PNG LNG. Target is raised to $7.09 from $7.08.
Sector: Energy.
Target price is $7.09.Current Price is $7.16. Difference: ($0.07) – (brackets indicate current price is over target). If OSH meets the Citi target it will return approximately -1% (excluding dividends, fees and charges – negative figures indicate an expected loss).
