Pakistan Petroleum Ltd. estimates tweaked post 3Q results – Foundation Research
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Foundation Securities (Pvt.) Limited
We reiterate our view that Pakistan Petroleum Ltd is undergoing a strong positive news flow heavy period, kick started by discovery announcement on Lundali on May 02. With PPL’s involvement in at least eight development drillings including three high-profile wells, we believe outlook on company’s production and earnings is firmly positive. Likely market excitement on future triggers may serve to reduce discount PPL trades versus its local peers (~10% on FY14E P/E).
Based on 3Q results, we trim our FY13/FY14 estimates by 3%/2%. PPL’s 3Q earnings of PKR6.84/sh carried a nominal negative surprise of 4%.
Let the good times roll: Among the three listed E&Ps, PPL remains the only player with significant near-term exposure to ongoing development drillings in key prospects finds at Nashpa, Mela and Tal block. Latest PPIS report suggests PPL is involved in at least eight development drillings. Going by the latest drilling results on these areas, we contend PPL’s production and earnings outlook is firmly positive. Our preliminary calculation suggests possible earnings upside from Nashpa/Tal block of PKR3-4/sh.
Among other projects which can make decent contribution to bottom-line include Makori GPF, Qadirpur (installation of compression), Adhi, Latif and Rehman.