By: JS Global Capital Limited
POL’s 3QFY15 earnings fall in line with our expectations: Yesterday, Pakistan Oilfields Limited (POL) reported 71% QoQ higher 3QFY15 earnings of Rs8.54 (in line with our expectation of Rs8.20/share) where key earnings growth driver was 99% lower exploration costs. Recall that in 2QFY15, POL booked one-time dry & abandoned well cost of Rs2.63bn. However on a YoY basis, 3QFY15 earnings slipped by 37%, where avg. 52% decline in Arab Light crude oil prices dragged revenues down by 23% even though LPG & oil production jumped by 94% and 3% respectively. As a result, 9MFY15 earnings clocked in 27% YoY lower at Rs31.14/share vis-à-vis 9MFY14 earnings of Rs42.71/share.
Oil prices marked-to-market, recent discovery incorporated: We revise our FY15E earnings estimate down to Rs39.39/share (vs. our previous expectation of Rs45.16/share), where we mark-to-market our (1) crude oil and LPG price assumptions and (2) operating costs estimates (+30% YoY in 3QFY15). We also build-in recent oil and gas discovery announced at Mardankhel-1, where we expect production of 2,600bpd of oil and 37mmcfd of gas to start from Jan-2016. We flag upside to these estimates post further testing of Hungu and Lockhart formations.