Australian Energy - Oil Prices

Submitted by Craig Strzelecki on 9 October, 2007 - 08:21

UBS has released some of their analysts' thoughts on the Australian energy sector, especially in the area of Oil Prices. In light of the recent strength in the oil price, the analysts have reviewed two oil pricing scenarios - Futures Curve and WTI spot to determine their impact on forecast EPS, valuations and our share price targets for our Australian E&P company coverage. Scenario 1: WTI Futures curve: average WTI oil price US$75/bbl: Applying the futures curve increases 2008 EPS forecast most for Tap (+84%), Santos (+47%) and Woodside (+41%). In 2009E and 2010E, Tap, Oil Search and Santos' earnings would benefit most. On valuation, AED Oil (+33%), Santos (+26%) and Oil Search (+21%) would be the best performers. Scenario 2: WTI spot price: WTI oil price US$81.48/bbl: Applying a spot oil price increases 2008E EPS most for Tap (+114%), Santos (+59%), Woodside (+48%) and Roc Oil (+48%). In 2009E and 2010E, Tap, Oil Search and Santos' earnings would benefit most. On valuation, AED would increase the most (+49%) followed by Santos (+37%) and Oil Search (+32%). Which Australian listed companies benefits most from rising oil prices? EPS: TAP, STO / OSH, WPL and ROC: NAV: AED. In general, they estimate Tap benefits most on EPS upside, followed by Santos / Oil Search, Woodside and Roc Oil. On valuation (NAV) and share price target, AED would get the most uplift, followed by Santos and Oil Search.

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