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Gold/Mining/Energy : Lundin Oil (LOILY, LOILB Sweden)

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To: Tomas who wrote (868)	12/13/1998 10:26:00 PM
From: Tomas	Read Replies (1) of 2742

Partners in the proposed Papua New Guinea to Queensland gas pipeline are expected to finalise negotiations on the integration of gas from the various fields by the end of the week. Such a move would see explorer and producer Oil Search diluting its interest in the overall project from about 35 per cent to 25 per cent through the sale of part of its Hides stake. According to Morgan Stockbroking, this dilution by Oil Search could yield proceeds in excess of $US80 million. The brokers have conducted a positive review of Oil Search and are recommending it as a buy stock. ... The price implies a discount for PNG Gas uncertainty and low oil prices. We consider the discount to be too high considering positive news to come and the strong EPS (earnings per share) growth even if oil prices stay flat. ''Oil Search remains our top pick of the larger oils,'' the firm reported in its update for the week ending December 9. The broking house also reported gas rationalisation talks were proceeding and were expected to be resolved by the end of this week in the USA, with an announcement early next week. It is understood Chevron is negotiating with Oil Search and Exxon for a big share of the gas from the Hides fields to be included in the pipeline project. According to Morgans, pressure on Comalco to commit to its alumina project in Gladstone has increased. It is expected the State and Commonwealth benefits package, worth about $A230 million, may be re-directed to other potential participants if Comalco does not initially participate. Morgans expected Oil Search to deliver a stream of positive news over the next few months based on its development projects. ''Moran oil and PNG Gas to Queensland will result in outstanding production growth, which converts into strong EPS and CFPS growth even if the oil prices stay flat. ''We acknowledge the risks associated with the PNG to Queensland Gas project it is not a done deal yet. However, based on the positive political, economic and environmental aspects of the project, we strongly believe it will proceed to go ahead in first quarter ¨1999, even if Comalco does not commit. PostCourier, Port Moresby, Monday December 14 postcourier.com.pg

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