KARACHI – A massive Rs 148 billion of OGDC and Pakistan Petroleum Limited (PPL) has been stuck up in circular debt, creating liquidity problems for these two state-run mega oil and gas exploration companies. Different departments and organisations owed around Rs 108 billion to the OGDC and Rs 38 billion to the PPL by December, 2010. Both state-run mega companies are trying hard to recover their receivable amount worth billions of rupees, said a research report of Arif Habib Limited.
However, the Pakistan Oilfields Limited (POL) remained almost unaffected by the circular debt problem as its recoverable amount is as low as Rs 3.75 billion, compared to total recoverable amount of about Rs 375 billion of all energy sector’s entities in the country. The report revealed that OGDC and PPL, who have already trimmed their dividends, could further reduce dividend in this fiscal.
The report further added that, despite risk of exploration cost, positive stance on POL is supported by a strong up-tick in production numbers and healthier balance sheet as compared to its peers. The oil and gas production recorded an annual increase of 18 percent and 87 percent respectively in the first half of 2011. The current strong gas production is expected to augment mainly on the expected gas addition from Makori, Maramzai, Tolanj and Domail. Following POL’s impressive 57 percent earnings growth in the first half of FY11, the report has revised its December 2011 target price to Rs 359 per share, an increase of six percent.
Meanwhile, MOL (Oil & Gas group of Hungary), in its recent investor presentation, showed keen interest of adopting an aggressive exploration and development strategy in Pakistan. The company plans to boost its hydrocarbon production in Pakistan that would especially bode well for POL due to its low base affect and POL’s heavy dependence on TAL block. This estimated peak production, projected by MOL, would not only come from TAL block (POL 25 percent stake), but from Margala, Margala North and Karak blocks where POL has a pre-discovery stake of 30 percent and 40 percent respectively.
The report said that it is very early to incorporate these estimates, given the fact that exploration work is yet to commence. However, MOL’s aggressive exploration stance re-affirms liking for the stock. In addition, MOL plans to drill new production well Manazalai-9 and to construct required facilities and pipeline for EWT of Makori East -1.
