Pakistan Oilfields Limited Makori East GPF in the box! What’s next? – BMA Research
By: Muhammad Affan Ismail,
BMA Capital Management Ltd.
We re-iterate our BUY call on Pakistan Oilfields Limited with a TP of PKR611/sh representing an upside potential of 12% plus a dividend yield of 11% translating into a total return of 23%.
We foresee the company to post 3 year FY13-FY16E earnings CAGR of 18% mainly driven by oil production FY13-FY16E CAGR of 13% and PKR depreciation.
Moving ahead, we believe a) further development wells at Makori East and Maramzai, b) exploration drilling in Margala and Tal blocks and c) dividend payout in Jun14 will remain the key value drivers.
The stock is trading at PER of 8.2x and 7.5x to our FY14E and FY15E EPS respectively.
Looking beyond ME GPF
The development of a large Gas Processing Facility at Makori East and resultant production addition from the field remained the only trigger in 1HFY14. Besides that, there has been no material development on exploration and development front in FY14TD period. Moving ahead, we believe the following ventures will remain the key value drivers of the stock:
Heavy reliance on TAL block to continue: After back to back success at Makori East, Maramzai and Mamikhel fields the company has highlighted its intention to pursue further drilling wells in these areas. In this regard, Maramzai‐3, Makori East‐4 and 5 have already been approved for drilling for FY15. The drilling at Manazalai‐11 is under progress. Given the rich profile of TAL block we believe further additions of ~2,000bpd oil and ~20mmcfd gas from any of the aforementioned drilling projects may translate into further ~PKR5.5/sh (8% of FY15E EPS) annualized upside in earnings.