The Stock of Pakistan Oilfields Limited (POL) has outperformed the benchmark KSE-100 Index by 11.7 per cent since the start of FY12. This resilience shown by the stock price is mainly attributable to the strong fundamentals like downward sticky crude oil price, healthy growth in the production flows and prospective discoveries as number of exploratory and appraisal wells are under drilling.
We believe that despite this strong out performance, the stock of POL has still more to offer with June-12 target price of Rs450 per share, translating into an upside potential of 28per cent from yesterday’s closing price of Rs353.2 per share, said Faisal Khan at AHL.
The company’s earnings are expected to depict a rise of 19.2 per cent to reach Rs13,302 million (EPS: PKR 56.23) in FY12. The stock offers an attractive dividend yield of 11.8 per cent with an expected FY12 payout of Rs40 per share and is trading at P/E of 6.0x. The company pays out dividend with its half yearly and full year results.
Manzalai XI discovery is likely to contribute PKR 2.66/share: POL recently announced discovery in development well of Manzalai XI. This field, as per initial estimates, is likely to produce 1,296 bbls of oil (Lockhard and Lumshiwal formation 580bbls and Samanasuk formation 716bbls) and gas of 30mmcdf from both formations. This discovery will result in EPS impact of Rs2.66 per share on POL as it has 21.1 per cent working interest in the block.
Makori East-1 would further prop up the earnings from 2HFY12: The production flows from Makori East 1, which was discovered in August 2010, is expected to commence from 2HFY12. The Makori East-1 is anticipated to enhance company’s oil and gas production by 3,000bopd and 10mmcfd respectively. This resultantly will increase oil share in company’s revenue mix, hence subsequently leading to higher sensitivity to the crude (Arab Light) prices.
More triggers in the pipeline: Domial-2 drilling has achieved its target depth and is under completion. Positive development from this appraisal well could be a potential price trigger for the company.
Makori East 2 (appraisal well) and Dhulian Deep-01 (exploratory well) is close to achieving its target drilling depth, any positive news flows from these highly prospective areas could provide potential trigger for Pakistan Oilfields. However, we believe, any productions flows from Makori East-2 will be dependent on completion Makori Gas Processing Facility, he added.
Oil Prices in FY12 To-date has averaged at $108.6 per bbl compared to last year’s average of $93.3 per bbl. Since approximately 48 per cent of the revenue is generated from oil, sustainability of crude prices at elevated levels would augment company’s earnings further.
