KARACHI: Pakistan Petroleum Limited’s prospects seem bright to analysts due to new production flows from Tal, Hala, Latif and Nashpa fields and upward wellhead price revisions.
PPL’s focus on joint ventures with local and international firms should also increase its chances for potential hydrocarbon discoveries and reserve additions.
Analysts at JS Global Capital say “the company’s stock is trading at an attractive FY11 PE with a dividend yield of 5.4x and 12 per cent, respectively.”
They rank Pakistan Petroleum Limited (PPL) as their top E&P sector pick on the back of stock’s compelling valuation. They expect the company’s earnings to grow 35 per cent in the fiscal year 2011.
Development plans largely on track
New crude oil and gas flows from Manzalai are expected to commence in the first half of the fiscal year 2011. Other than that production from Mamikhel and Maramzai are also expected to commence during the first half of the fiscal year 2011.
The combined production flows from the two fields are expected to stand around 4,300bpd of oil and 85mmcfd gas, according to JS Global Capital analysts. They estimate that this would improve PPL’s annualised earnings by Rs2.4 per share.
Production flows from Latif and Gambat have already lifted PPL’s production by around 15mmcfd gas; adjusted for stake.
“The company management expects to achieve production flows of around 1,200 barrels of oil per day and 15mmcfd gas from Hala in the fiscal year 2011, according to JS Global Capital analyst Umer Ayaz.
They will be able to further increase production once the Qadirpur compression project is completed by the expected date of September 2010. Furthermore, new gas flows from recent discovery of Latif North begin as per the initial tests, gas flow from the field stood at 44.7mmcfd.
Wellhead prices set to improve further
Apart from the expected production enhancements, PPL is also a key beneficiary of the upcoming wellhead price revision, as we expect Sui and Kandhkot prices to increase by around six per cent from the current wellhead price of Rs143.9 per mmbtu.
With the two fields having contributing over 70 per cent to PPL’s gas production; the upcoming revision is likely to improve PPL’s first half fiscal year 2011 earnings by Rs0.6 per share. Other than that the wellhead price of Sawan, the third biggest contributor to PPL’s gas production, is also likely to rise by four per cent in the upcoming revision.
Published in The Express Tribune, July 6th, 2010.
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