Australian Stock Market Report – Midday 10/22/13

Mid Session Report
(12:00 AEST)

• The ASX200 has been well supported in early trade on Tuesday. The index made successive highs in the first hour of trade. Significantly this price action was supported by solid volumes.

• The key theme was the outperformance of the cyclical's at the expense of the defensives. A strong production report from BHP was an important catalyst in the outperformance of the materials sector.

• BHP's Pilbara operations shipped 54 million tonnes in the last quarter bringing its shares of mined output to 49 million tonnes. The result bettered analyst expectations of about 50 million tonnes in sales. Petroleum production was two per cent above the prior corresponding period. The group´s US shale oil operations increased production by 29 per cent in the quarter. Petroleum is expected to eclipse iron ore as the biggest income earner in coming years. BHP continues to ramp up production at its US shale oil and gas operations. Copper production was six per cent higher on a year ago at 403,000 tonnes, metallurgical coal 14 per cent up at 10.2 million tonnes and energy coal 3.0 per cent better at 19.6 million tonnes.

• Energy stocks are one of the sectors to underperform so far after the price of crude oil fell through $US 100.00 per barrel mark overnight. Helping the fall in was an increase in US crude oil inventories in the last week which was ahead of expectations.

• Oil Search (OSH) shares were flat after the group said it had increased production in the September quarter although it sold less oil and gas in the period. Production in the three months to the end of September rose 10 per cent from the last quarter. Total production for the first nine months of 2013 rose to 4.97 mmboe, up from 4.59 mmboe last year. OSH maintained full year production guidance, forecasting that it would be towards the upper end of a 6.2 to 6.7 mmboe range. Total operating revenue, for the quarter was down 14 per cent to $US175.3 million on sales that were 19 per cent weaker. The fall in sales was blamed on the timing of shipments. The PNG LNG project is on track to make its first deliveries next year.

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