The securities ratings house also labelled Oil Search as a "lower risk exposure" to Asian liquefied natural gas through its fully contracted PNG LNG project and expansion opportunities.
However, while JP Morgan believes joint venture partners for the PNG LNG project will approve a third train, it was hesitant to take the eventuality into account when making its forecast.
It also said a lower exploration spend in this quarter would help keep costs down, leading to the earnings upgrade.
While JP Morgan upgraded its 2011 forecast, it also put up its 2012 forecast up by 7%, saying a higher premium on Papua New Guinea oil sales relative to the West Texas Intermediate marker could have a positive impact on the company.
Its target price for Oil Search is $A6.98 per share, inclusive of the full value of the first two trains of the PNG LNG project while taking into account 50% of the third train's expected value.
It listed the main risks to its target price being the spot oil price, progress toward the fruition of the PNG LNG project and exploration success to find enough gas to progress with the third and fourth trains at the project.