POL revenue to grow by 9pc due to oil forecast revision

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Revision in Arabian light crude oil forecast from $80 per bbl for FY12 onward to $95 per bbl for FY13 onward have led Pakistan Oilfield Limited’s overall revenue to grow by 9 per cent in FY13 whilst the oil based component of the revenue pie is expected to expand by 19 per cent in FY13. It is pertinent to mention that international oil prices have notched up to an average of $92 per bbl in FY11 depicting a rise of 26 per cent YoY and 36 per cent since FY10. Total production is estimated to grow at a 3 years (FY11-FY14) Compound Annual Growth Rate of 14 per cent with major impetus emanating from Makori East. Commencement of production from Makori East-02 subsequent to tie in is expected to double the production flows from TAL to 18kbpd of oil and 400mmcfd of gas by FY14. According to latest PPIS report, flows from Domial-01 stand at 287bpd of oil and 3.2mmcfd of gas while Domial-02 is in the drilling phase and facing a slight delay due to technical issues. During FY11, expansion in gas production outstripped that of oil as the former grew by 38 per cent to 87mmcfd while the latter escalated by six per cent to 4650bpd. Volatility in revenue stream owing to variation in oil prices has also gradually subsided as the sales mix has skewed towards natural gas. We estimate the revenue share from natural gas to rise from 27 per cent in FY09 to 36 per cent in FY12, said Salman Vidhani, Sr. Investment Analyst at HMFS. However it is pertinent to note that 65 per cent of gas revenue stems from capped fields which is expected to curtail the gains from revision in oil price assumption. The scrip is trading at an attractive forward Price Earning Ratio of 6.5x, which is substantially lower than the sector PER of 8x. Ensuing to recent bearish spell at the local bourse and imminent re-rating of market multiples upon gradual easing in the monetary stance of the central bank, the scrip can fetch attractive yield to savvy investors in intermediate term.