Earnings Report /
Pakistan

Pakistan Oilfields: Q1 FY 20 results exceed expectations on lower opex and exploratory costs

    Saad Ali
    Saad Ali

    Head of Research

    Intermarket Securities
    15 October 2019

    Pakistan Oilfields Ltd (POL) has posted Q4 FY 19 NPAT of PKR4.0bn (EPS PKR14.12), up 4% yoy, but down 30% qoq. The result is slightly better than our EPS estimate of PKR13.47. Key deviation from our expectation are lower exploration expenses (albeit up 1.65x qoq) and operating costs.

    Key Highlights for Q1 FY 20

    • Net sales of PKR10.2bn also came in lower than expected. It fell 8% qoq and 3% yoy. The sequential decline is due to 8% lower oil production (c6,700bpd) and 8% lower oil prices. 
    • As expected, exploration expenses rose significantly as MOL (operator of Tal) has recently ramped up geological studies in Tal block and POL has done the same in its own operated fields. However, it came in lower than expected. There was no dry well during the quarter.
    • Other income fell 85% qoq and 44% yoy due to lack of exchange gains and dividend from National Refinery.

    We have a Buy stance on POL with a TP of PKR460/sh (20% potential upside). Key reasons for our liking is high potential for upgrade of production trajectory of Tal block (its main asset) due to increasing drilling activity in that block and high dividend yield of 13% (assuming US$65/bbl average oil prices).

    Risks: (i) Unsuccessful appraisal well at Jhandial, and (ii) lower offtake by refineries due to furnace oil phase out.