Posco Int’l shares, bottom-line expect benefit from new gas field discovery

Shares and the bottom line of Posco International Corp., general trading and business development unit of South Korean steel giant Posco, are expected to get a big boost from a new gas field recently discovered off the western coast of Myanmar projected to turn out 500 billion won ($411.4 million) worth gas.

A drilling test at the Mahar exploration well at the Block A-3 offshore gas field, west of Myanmar, showed that prospective gas reserve amounts to 660 billion cubic feet (18.7 billion cubic meters), the company confirmed Tuesday in a regulatory filing. The company announced last week its discovery of the new gas field and plans to begin test extraction in 2021.

Gas turnout from the new field can add up to 500 billion won, experts believe.

The gas field is expected to churn out gas worth between 400 billion won and 500 billion won based on a 7 percent discount rate if the company successfully extracts 660 billion cubic feet gas, said a Ryu Je-hyun, an analyst at Mirae Asset Daewoo.

“Additional tests are still required to accurately assess the new gas field’s commercial value but the business prospect is bright, given that it is near the company’s existing gas field,” said Baek Jae-seung, Samsung Securities analyst.

The newly discovered gas well is located around 30 kilometers south of existing Shwe gas field in Myanmar, allowing the company to save development costs by sharing production facilities.

The new discovery is expected to lift the company’s earnings outlook for this year. Market consensus compiled by local market tracker FnGuide on Wednesday showed that Posco International is expected to record 318.8 billion won in net profit this year, up 57.5 percent from a year earlier.

Shinhan Investment, another local brokerage, has revised up the target price of the company’s stock to 23,000 won apiece from 21,000 won.

On Thursday, Posco International stock is trading 1.24 percent lower at 15,900 won, as of 11:00 a.m. in Seoul, in line with the overall market that is weighed down by virus scare.

Source: Pulse News

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