Will Santos bid for Oil Search?

James Gerrish

Market Matters

Another day where the market ebbed and flowed in a reasonable range, typical of a low volume ‘school holiday’ sort of session. Not a lot happening across the desk today in terms of volumes, however there were a couple of interesting stock moves that played out. We covered Energy / Oil prices in the AM report today, highlighting that crude oil prices bottomed in mid-June and Wednesday’s sharp 4.3% kick higher is a reasonably bullish sign, not only for oil but also for bond yields. Historically, when crude oil rises US bond yields follow suit although there’s usually a lag while investors take their time to become convinced that oil's rally is real / sustainable.

Oil Search (OSH) +3.5% was one of those stocks in focus today on reports that Santos (STO) could be considering a takeover bid for the company. No sources were really given and both companies denied the rumors. However, it makes sense given the relative outperformance of STO v OSH over the past 12 months - if it’s a scrip deal. Oil Search has been hit by political uncertainty in Papua New Guinea, where the bulk of its operations are, and the expected departure of its long-standing Managing Director Peter Botten while STO is looking for growth opportunities. OSH is capped at$11bn, STO at $14bn while WPL remains dominant at $34bn.

Oil Search (OSH) v Santos (STO)

Aerial mapping business NearMap (NEA) was also one of the movers today down by ~9% at the close, however they traded in a big ~15% trading range. They were out with some preliminary numbers that hit the high notes on first read through. However, they were clearly helped by a depreciating AUD which juiced up their growth numbers. A stock on a huge multiple, and management clearly conscious of delivering big growth to justify it, but the underlying numbers today weren’t as upbeat as the headlines imply plus they also changed accounting standards to throw more complexity into the mix. It’s obviously been a wonderful performer, however this is the type of stock we’re avoiding at this juncture.

Nearmap (NEA) Chart

Overall today, the ASX 200 closed down -19pts or -0.29% at 6696. Dow Futures are trading up +89 points or 0.33%.

ASX 200 Chart

ASX 200 Chart


Sectors this week:

Stocks this week:

Broker Moves;

· BHP Group PLC Upgraded to Neutral at JPMorgan; PT 20.70 Pounds

· Santos Upgraded to Outperform at Macquarie; PT A$8.20

· G8 Education Downgraded to Hold at Canaccord; PT A$2.80

· Newcrest Downgraded to Hold at Shaw and Partners; PT A$28.70

· Evolution Downgraded to Hold at Shaw and Partners; PT A$3.90

Never miss an update

Market Matters publishes daily market reports and sends SMS alerts when we transact on our portfolio. To get our latest market views and hear when we take new positions, trial Market Matters for 14 days at no cost by clicking here.

1 topic

James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.