The Bell about Oil and Gas – Elixir Securities Limited

Karachi: POL: Outperformance to continue; triggers lined up

According to Elixir Securities Limited,


Pakistan Oilfields Limited
PKR million FY10A FY11A FY12E FY13E FY14E
Oil (US$/bbl) 75 93 109 110 100
PKR/US$ 84 86 92 96 102
Volume sales (million boe) 6.39 8.07 8.70 9.91 10.28
-Oil (’000 bbls) 1,473 1,659 1,854 2,141 2,574
-Gas (mmcf) 22,641 31,530 33,760 38,448 38,179
Net sales 17,845 24,951 30,388 35,657 42,166
-Oil 8,238 11,804 14,968 18,381 24,215
-Gas 5,587 8,166 9,411 11,142 11,649
Cash opex 1,650 2,312 2,801 3,525 4,045
-per boe (US$) 3.08 3.35 3.51 3.69 3.87
EBITDAX 12,400 17,246 21,125 24,980 30,157
EBITDA 10,793 16,171 19,889 23,558 28,522
Net Income 7,437 10,815 13,017 15,673 19,135
EPS (PKR) 31.4 45.7 55.0 66.3 80.9
DPS (PKR) 25.5 35.0 44.0 53.0 65.0


Source: Company Accounts, Elixir Research

POL Outperformance to continue

KSE‐100 index return over the last year and a half has been a dismal 13.6%. POL return, on the other hand, has been a decent 41%. Even in the recent ‘CGT SRO’ rally, total return on POL has been in line with the market but higher compared to its peers. POL’s return has largely been driven by (a) increase in international oil price (b) 8% production growth (c) new discoveries at Tal, and (4) higher than industry dividend yield of 12%.

Going forward, Elixir Securities Limited expects POL to continue to outperform the broader market due to development of Tal block which will increase company’s production by an average of 10%p.a. over FY12‐15E leading to an average earnings growth of 20%.

60% of POL value comes from TAL

Due to relatively smaller equity base vis‐à‐vis peers and large size of Tal block, POL’s share price is most leveraged to news related to Tal. MOL expects peak production from Tal block to come in 2016 at 205,000‐230,000 boepd. The company is building up a 150mmcfd gas and 30,000 bpd oil processing plant to process Markori gas in addition to the existing facilities that can process 370mmcfd of gas and 11,500 bpd oil. Accordingly, Elixir Securities Limited now expects peak production from Tal block at 500mmcfd gas and 30,000 bpd oil by 2016 (119,000 boepd).


Tal: Flows from existing wells Operator plans over 2012-2013
Field Oil (Bpd) Gas (mmcfd)
Manzalai 4,500 260 Drilling of two appraisal and one exploratory well
Makori 1,600 24 Drilling of two development and two producing wells
Mamikhel 1,250 20 Makori GPF – capacity addition of 150mmcfd gas and
Maramzai 1,600 40 30,000 bpd oil
Tolanj 10 Addition to Makori EPF – capacity to be increased by
Makori East * 12,000 30 10mmcfd gas and 4,500 bpd oil
20,950 384 includes expected flows from Makori east 2
Source: PPIS, Elixir Research


New wells at Adhi, Pindori and a decent exploration program

Joint venture partners have agreed to drill new developing wells at Adhi and Pindori. Pindori field remains clogged with water incursion issues and hence a new well may not add significantly to field production.

At Adhi, 11 wells are currently under production and produce 7,000 bpd oil/condensate and 38mmcfd gas. Production could likely go up by another 1,500‐2,00 bpd oil due to hydraulic fracturing of wells and drilling of a new well. A third LPG and NGL recovery plant is being set up to cater to this production growth.

On the exploration front, the company has stepped up its exploration program and has acquired two more exploratory licenses taking operated exploration blocks to 4. The company is also a partner with MOL (operator of TAL) in three blocks and with OGDC in 1 block.

Raising LT oil price to USD100/bbl; Price target raised to PKR460

POL derives nearly 50% of its revenues from oil. Realized oil prices for the company also move in line with international crude prices. Assuming a long term oil price of USD100/bbl and incorporating development of new discoveries at Tal, Elixir Securities Limited increases Elixir Securities Limited’s Dec‐12 PT to PKR460. At current price, the company is trading at a FY12/13 PE of 6.6/5.5x with a dividend yield of 12/15% respectively.

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