KARACHI – In wake of a recent fall in respective stock prices, healthy 1HFY11 results, active exploration potential and recent hike in oil prices, Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL) have remained attractive stocks. In addition, new production flows, nine percent higher Arab Light prices and an upward revision in gas wellhead prices have also contributed to the profit growth of the two companies.
PPL and POL are direct beneficiaries of the two recent discoveries at Makori East and Tolanj in Tal, where they hold post discovery stakes of 28 percent and 21 percent respectively.
Drilling is still in progress at Tolanj, where the operator expects improved flows once the well reaches its target depth. POL is drilling an exploratory well at Chak Naurang, in addition to drilling on Domial-2 well.
Testing on Domail-1 is likely post procurement of completion equipment. PPL is currently drilling two appraisal wells in Nashpa block and is likely to commence drilling of another exploratory well in Hala from next month. Moreover, it has also planned to drill a well in Chachar field, likely to commence in the 4QFY11.
Global oil prices have also sustained a rise spurred by global economic recovery. The recent Middle- East turmoil has cause worries as the Arab Light crude prices have surpassed $100 per level (currently trading at $103 per barrel). The average Arab Light price, since July 2010, is currently hovering around $82 per barrel, slightly exceeding the FY11 assumption of $80 per barrel.
Although, Pakistan is keeping its oil price assumption intact, an upward revision of $1.0 in oil price assumption would raise E and P sector earnings estimates by 0.5 percent, provided everything else is constant, said Uumer Ayaz at JS.
POL reported earnings of Rs 5.2 billion (EPS Rs 21.99) for 1HFY11, an increase of an annual 57 percent. Growth in earnings was mainly attributed to new hydrocarbon flows from Manzalai and Bela, which pushed company’s oil and gas production to 9,032bpd (up 18 percent) and 171mmcfd (up 85 percent), respectively.
Other income was up by an annual 22 percent, led by dividend income from its group companies. Moreover, a 48 percent decline in exploration cost in the absence of any drywell write offs further strengthened the company’s bottom line.
PPL, with a net profit of Rs16.6 billion (EPS: Rs 13.9), reported impressive earnings growth of an annual 70 percent in the 1HFY11. This was predominantly due to a 48 percent annual rise in the company’s top line primarily led by higher oil (up 70 percent yearly) and gas (up 5.0 percent annually) production contributed by Manzlai, Hala and Nashpa fields. Other income also jumped, settling at Rs1.9 billion compared to Rs 1.3 billion in the 1HFY10.
PPL and POL steal the limelight
