JS Securities Limited – Oil sector lead market gains, KSE-100 up 3% WoW

Karachi, April 10, 2015 (PPI-OT): The Karachi Stock Exchange (KSE) extended last week’s gains to close the week 3% WoW higher at 32,351 with trading volumes averaging at 240mn shares/day (-5% WoW). Foreigners turned net sellers during the outgoing week, with net foreign selling of US$6mn vis-à-vis net buying of US$4mn the preceding week. Heavy-weight Oil and Gas sector rallied led by discovery of hydrocarbon reserves in Mardankhel (Tal Block) and uptick in international oil prices, while Cements and Fertilizers stocks gained as the government once again delayed the gas tariff hike.

The book-building for the Secondary Public Offering (SPO) of Habib Bank Limited (HBL) was also completed during the week, where Government of Pakistan is initially offering 250mn shares at a floor price of Rs166. Other key highlights of the week were: (1) Chinese President postponing his trip to Pakistan due to a fragile situation in Yemen, (2) Government announcing Power Policy 2015, (3) Government considering introduction of uniform gas tariff, (4) Cement dispatches rising by 4% YoY in 9MFY15 and (5) OMCs sales growing by 17% YoY in March 2015.

Discovery at Mardankhel – POL major beneficiary

Pakistan Oilfields Limited (POL) along with its partners (OGDC, PPL) has successfully discovered additional hydrocarbon reserves at Mardankhel-1’s (Tal Block) Lumshiwal formation. The well successfully tested 2,105bpd of oil and 24.01mmcfd of gas. Based on initial tests results (assuming US$55/bbl), the additional production is likely to have positive earnings impacts of ~Rs4.3/share for POL, ~Rs0.7/share for PPL and ~Rs0.3/share for OGDC. The cumulative production tested so far is 2,621bpd of oil and 37mmcfd of gas.

Ministry seeks Rs20bn to clear PSO’s, IPPs’ dues

Ministry of Water and Power has reportedly sought Rs20bn from the Ministry of Finance for making payments to Pakistan State Oil (PSO) and Independent Power Producers (IPPs) on account of Tariff Differential Subsidy (TDS). The government has already exhausted the Rs179bn of power subsidy budgeted for FY15.

Govt. considering introduction of uniform gas tariff

According to news reports, government is considering introducing a uniform gas tariff of Rs750/mmbtu for all sectors from July-2015. However, gas tariff for a few Gencos, domestic consumers and new fertilizer plants is expected to remain constant.

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