Equity Analysis /

Pakistan Oilfields: Successful well in Tal block; material positive for POL

    Saad Ali
    Saad Ali

    Head of Research

    Intermarket Securities
    22 August 2019

    As per a material notice by Pakistan Oilfields (POL) on PSX, the second (development) well at Makori Deep (Tal block) has tested initial oil and gas flow of 1,844bpd and 18.25bpd at choke size of 32/64. 

    The field is based on Petroleum Policy 2012 and will thus fetch a gas price of US$5.4/mmbtu at assumed benchmark oil price of US$65/bbl.

    This will have a meaningful EPS impact for POL (21% stake), while relatively modest for Oil & Gas Development Co. (OGDC) and Pakistan Petroleum (PPL). See the table below.

    EPS impact (annualised)

    Source: IMS Research

    This is the first successful well in Tal block since Makori East-6 drilled in FY17; Mamikhel Deep, an exploratory well drilled during FY18, was a dry well.

    Makori Deep (discovered in Jun'16) well was producing about 900bpd of oil and 60mmcfd gas prior to the above well (by 6 Aug 2019). Recall the field commenced production in Nov'16 at 4000bpd and 40mmcfd. The find had a reserve downgrade in 2018, where the revised reserves implied a reserve life of barely 3 years. This well may help to both lift the field's production and also trigger a reserves upgrade (could potentially appear in Dec'19 reserves data of PPIS). 

    Makori Deep-2 well was spud in May'19 and found producing in Aug'19, which implies a quick turnaround in Tal block. ME-6 in comparison was in drilling for 11 months.

    Another significance of this find is the likely recovery in overall production at Tal block, which was fast declining because of (i) depletion at Makori East (largest oil producer in the block) and (ii) sharp decline in its earliest finds. Production of only Mardankhel and Maramzai had been holding up. This recovery will be more significant for POL, which is still considerably leveraged to Tal block (68% of FY19f Revenue).