Oil Search is an oil and gas exploration and development company that operates all of Papua New Guinea’s (PNG’s) productive oil and gas fields. There are a number of reasons why I like the stock.
The company’s main growth asset is its 29% stake in the PNG Liquefied Natural Gas (LNG) project that it operates in partnership with ExxonMobil. The PNG LNG project is a high-quality asset, with a long life and low costs, and I believe there are few risks to its development because it has the support of both the PNG government and local communities.
This widespread support is testament to the company’s management. I have confidence in Brian Horwood, the Chairman, who has over 40 years’ international experience in the mining industry, and Peter Botten, the Managing Director, who has extensive international experience in the oil and gas sector.
The Chairman recently reported that in 2011 significant progress was made on all facets of the PNG LNG project and that an LNG-related modification to the company’s oil field processing and liquids export facilities had been completed. He noted that the project was on track and should be producing gas by the end of 2012, with sales to commence in 2014.
This should see the company’s earnings start to climb again after stalling this year due to oil production cost pressures and declining production. The company’s earnings should also be supplemented by additional LNG opportunities offshore in the Gulf of Papua and other exploration interests in PNG, the Middle East and North Africa.
I will be cautiously watching the outcome of the PNG election in June, but for the time being I am happy to hold the stock. We are forecasting the company to earn around $1.5bn in free-cash-flows by 2015 assuming a conservative 2 train* LNG development, and on this basis the stock is currently trading at around a 30% discount to its net-present-value. Further upside to our current valuation is predicated on proving additional LNG reserves for a possible 3rd and 4th train expansion.
*An LNG train is the term used to describe the liquefaction and purification facilities in a liquefied natural gas plant.
Oil Search is currently held overweight in our Concentrated Equity Fund, SHARE-PLUS Long-Short Fund, Pure Equity Alpha Fund, Global Resources Fund and Australian Sustainability strategy.
Paul Skamvougeras
Portfolio Manager
Paul is the Portfolio Manager for the SHARE-PLUS Long-Short strategy, the Pure Equity Alpha strategy and the Concentrated Equity strategy.
Paul rejoined Perpetual Investments in February 2010 as a Portfolio Manager, having previously spent seven years with Perpetual. He began his career with Perpetual in 1994 in a back office role, moving into a dealing role after three years, working his way up to the Head Dealer role.
Between stints at Perpetual, Paul spent seven years working at CPH/Ellerston Capital, where he had portfolio management responsibilities for an Australian long/short strategy for the first four years and a global long/short strategy for the last three years.
Paul has a Bachelor of Economics from Macquarie University and is a Member of the Institute of Chartered Accountants.
By Paul Skamvougeras
Portfolio Manager
Paul is the Portfolio Manager for the SHARE-PLUS Long-Short strategy, the Pure Equity Alpha strategy and the Concentrated Equity strategy.
Paul rejoined Perpetual Investments in February 2010 as a Portfolio Manager, having previously spent seven years with Perpetual. He began his career with Perpetual in 1994 in a back office role, moving into a dealing role after three years, working his way up to the Head Dealer role.
Between stints at Perpetual, Paul spent seven years working at CPH/Ellerston Capital, where he had portfolio management responsibilities for an Australian long/short strategy for the first four years and a global long/short strategy for the last three years.
Paul has a Bachelor of Economics from Macquarie University and is a Member of the Institute of Chartered Accountants.
Fri, 18 May 2012
Oil Search is an oil and gas exploration and development company that operates all of Papua New Guinea’s (PNG’s) productive oil and gas fields. There are a number of reasons why I like the stock. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Wed, 19 Sep 2012
After soft European and US sessions on Monday night, Asian markets were down yesterday with the MSCI Asia Index recording its second decline in a row led by losses in China, Japan, Singapore, Hong Kong and Australia, whereas India bucked the regional trend in response to policy announcements. The overall performance during the Asian sentiment reflected what has been part of an emerging trend, where with major central bank policy decisions behind us, investors are increasing focusing on the state of the global economy, where every region is either weak or is slowing down. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Tue, 18 Sep 2012
So helicopter Ben decided to push the QEIII button, with an unlimited amount of money ($US 40 billion per month, until US unemployment declines to an undisclosed level) to be injected into the US financial system. Even though it had been mostly factored into prices, even though it will do nothing to lift the anaemic US economy and even though market had rallied for three months on expectation of continued central bank support, the announcement was like a shot of adrenalin into global sharemarkets and Asian markets have experienced large rises over the past two trading sessions. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Fri, 07 Sep 2012
European markets opened positively and were up 0.5% a few minutes after the bell as the market awaited the details of the ECB's bond buying program called the Outright Monetary Transactions (OMT). They were not disappointed. The plan basically came out as was leaked, with the key features including unlimited capacity, sterilised, purchases out to 3 years, and no explicit limit on interest rates. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Tue, 04 Sep 2012
Asian markets were mixed on Monday with the MSCI Asia Index flat as gains in China, Hong Kong, Korea, and Australia were offset by declines in Japan and Singapore. Asian markets were under early pressure as investors noted how China's slowdown was impacting regional supply chains – and taking its toll on exporters in the process. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Thu, 30 Aug 2012
The highs and lows in Europe continue. Overnight, European markets opened once again in the red and in the first hour were down at their daily lows. But the release of an opinion piece by European Central Bank President Mario Draghi in a German newspaper strengthened expectations that a major announcement on measures to address the European debt crisis was imminent and sparked a rally after Mr Draghi wrote that “exceptional measures” were occasionally needed by the ECB to ensure monetary policy was effective. Read more
By Adam Curtis
Senior Portfolio Specialist, Income and Multi Sector
Adam has over 12 years’ experience in the financial markets. Having graduated with an International Business degree in 1997, Adam joined Bankers Trust, working in the funds management and margin lending business. In 2000, Adam moved to London and joined the Bank of New York for the next two years, where he worked on the fixed income desk and serviced a range of institutional clients across mainland Europe.
Upon returning to Australia, Adam was hired by CPG Advisory, a specialised Asset Consultancy based in Sydney. He worked there for nearly five years, providing advice and assistance in managing the investment portfolios of some of the firm's largest wholesale clients. In August 2008, Adam was recruited as Senior Portfolio Specialist at Perpetual in the Income and Multi Sector business where he represents Perpetual's capabilities across multi sector, fixed income and alternatives investment strategies.
Wed, 29 Aug 2012
Over the past five years, many investors have been attracted to term deposits as a way of meeting their needs for low risk investment, lured somewhat by the government guarantee on deposits. However, what many investors don’t realise is that the government guarantee is only applicable on term deposits of up to $250,000 and beyond this level, no guarantee of capital exists. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Mon, 27 Aug 2012
In the wake of a weak day in the US on Thursday, and a tough Asian session on Friday where Hong Kong, Japan, China and South Korea all fell by over 1%, European markets over the weekend opened in negative territory. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Thu, 23 Aug 2012
The impressive rally in global sharemarkets and corporate bonds over the past six weeks is showing signs of fatigue. Over that time, investors have piled into technology, consumer discretionary and financials shares in Northern Hemisphere markets, as additional policy support by regional central banks was factored into prices. The apparent sector rotation comes despite signs that global growth prospects are waning, as illustrated by recent data that showed Japan recorded its largest ever trade deficit in July. Yesterday, Asia had a down session as investors concern about a lack of a policy response by Chinese authorities saw widespread losses. This provided a challenging lead for Europe. Read more
By Vivek Prabhu
Senior Portfolio Manager - Strategy & Risk
Vivek has been Portfolio Manager/Credit Analyst since joining Perpetual Investments in August 2004 and is responsible for credit analysis, portfolio construction and trading.
Vivek has over 15 years industry experience and prior to joining Perpetual worked for eight years at Macquarie Bank as an Analyst, Compliance Manager, Assistant Portfolio Manager (Fixed Interest & Currency) and Credit Analyst. Prior to that he spent four years as an accountant/auditor at Coopers & Lybrand (PwC).
Wed, 22 Aug 2012
The Australian Government introduced the Financial Claims Scheme in October 2008, strengthening protection for depositor holders of authorised deposit taking institutions to reassure investors about the safety of their deposits. This followed the introduction of similar measures taken by other countries in response to concerns around the availability and cost of funding for banks, following the collapse of Lehman Brothers in September 2008 and its impact on the stability of the global financial system. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Mon, 20 Aug 2012
After a strong Asian session in which all major regional indices were higher (led by Australia (+0.9%), Japan and Hong Kong (both up 0.8%) and China (+0.1%)), the scene was set for a good end to the week in Europe. It was green lights all the way on screens on Friday night as markets extended gains and touched multi-month highs as hopes for more Eurozone support and further signs of improvement in global economic data boosted sentiment around the Northern Hemisphere. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Wed, 15 Aug 2012
Yesterday saw a solid Asian session where all major regional indices were up after the minutes from the Bank of Japan’s latest policy meeting showed some board members supported further liquidity measures. European markets opened solidly last night with momentum aided by some better-than-expected GDP results. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Mon, 13 Aug 2012
Asia ended last week with a disappointing session in which Chinese data underwhelmed and regional sharemarkets were all down. Data for July continues to suggest that the soft landing in the Chinese economy has not been reached yet. Indeed, a slowdown in industrial production (IP) growth (from 9.5% to 9.2%), a plunge in annual export growth (to 1% from a double-digit pace in 2011) in July and tepid bank lending (which missed analyst forecasts by a wide margin) all point to the Chinese recovery being weaker, and coming later, than many investors had hoped. Read more
By Matthew Sherwood
Head of Investment Market Research
Matthew is Perpetual Investment’s Head of Investment Markets Research. In his role, Matthew conducts research on and acts as an external voice on the Australian and global economies, financial markets and portfolio strategies.
Matthew has extensive financial industry experience as an economist, investment strategist and central banker. Prior to joining Perpetual Investments in 2005, he worked as an Investment Research Manager at ING Investment Management and before that he was a Senior Economist with the Reserve Bank of Australia, where he gained significant experience in monetary policy formulation. Matthew has a Bachelor of Business from the University of Newcastle and a Masters Degree in Economics (Finance and Econometrics) from the University of Sydney.
Fri, 10 Aug 2012
Despite a strong Asian session (in which stocks in Hong Kong and Japan rose +1.0% following data from China which suggests that the economic boost remains elusive, but inflation dropped again, providing the Bank of China with more scope to support growth), the performance on the London and European stock exchanges, last night, was a complete repeat of the night before. The German and UK markets were down early (the former troughing at -1.0%) before staging a late surge to close flattish for the second day in succession. Read more
By Jonathon Crook
General Manager Fixed Income
Jon joined Perpetual in October 1999. He has over 15 years experience in the financial services industry and is currently responsible for the Fixed Income business at Perpetual. Previous to this role Jon held a number of positions in both Adviser Distribution and Institutional Sales and Service within Perpetual. Before this, he spent three years with Count Financial Group. Jon has a Bachelor of Economics from the University of New South Wales and a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia.
Wed, 01 Aug 2012
As a result of the global financial crisis and the ongoing volatility in financial markets, investors have awakened to the vital role fixed income can play in generating reliable income and protecting capital.
However, fixed income is a very broad asset class, which includes everything from quality bonds backed by major governments and corporates to high yield, high risk junk bonds. It is therefore vital for investors and advisers to understand what drives the underlying risks and returns of different types of fixed income assets and how they can contribute to an overall portfolio. Read more
