Pakistan Oilfields Limited: FY11 EPS likely at Rs45.3, up 40% YoY

ISLAMABAD: Pakistan Oilfields Limited (POL) is all set to announce its corporate result for FY11 on September 11, 2011. We expect the company to post earnings of Rs12.2 per share in 4QFY11, translating into full year earnings of Rs45.3 per share.

Furthermore, we anticipate a final cash dividend of Rs22 per share to accompany the corporate result, rendering into full year payout of Rs32 per share.

Despite the uncertainty surrounding the international crude oil prices, we continue to maintain ‘BUY’ stance on the scrip, which is offering a FY12F dividend yield of 12% (base case assumption) and is trading at FY12F and FY13F PE of 6.6x and 5.3x, respectively.

Company’s topline to jump by 41% on account of improved net realized hydrocarbon prices and improved volumetric production company’s topline is expected to post an impressive growth of 41% to stand at Rs25.2bn in FY11 as compared to Rs17.8bn last year. We estimate company’s net realized oil and gas prices to improve by 27% and 5% to respectively, while thanks to improved production from Tal block, company’s oil and gas production increased by 10% and 40% respectively.

In 4Q alone, we expect company’s topline to stand at Rs7.0bn, depicting a double digit improvement of 40%. Exploration cost down 24%, other income up 26% in addition to the growth in the topline further support to the bottomline likely to comes from i) decline in company’s exploration cost by 24% to Rs1.2bn thanks to no dry well and ii) 26% surge in company other income on account of higher payout of its associate companies and high interest rate environment.

Major risk to our earnings valuation comes from adverse movement in the international crude oil prices. It’s worth mentioning here that international crude oil prices (Arab Light) continues to hover above our base case price assumption of US$96 per barrel in FY12, thus we are keeping our base case earning projection intact. On volume front, we expect augmented production from Tal and Iklas block to keep the investor interest in the scrip.

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