Pakistan Oilfields Ltd – Large find in Domial already in EWT phase

Domial-01 yields 942bpd oil; 11 mmcfd gas: POL announced a large oil/gas discovery at Domial-01 well in Ikhlas block, yielding 942bpd oil and 11mmcfd gas at testing phase. The discovery shall have an EPS impact of PKR6.1/share, 12% of FY12 estimates.

EWT phase has already started; FY12 EPS upped 12%: EWT phase at Domial-01 well has already started, using nearby production facilities at Meyal field. The well is currently flowing at a rate approximately similar to announced discovery flows.

Domial would be a high impact find: Domial would potentially be a very high impact find for POL, given the high working interest (80%) that POL enjoys in the block. Further appraisal & development upside at Domial is highly likely as Domial-02 is nearing completion.

Risk of exploration write off has also eased: Domial-01 was an expensive well with drilling cost estimate at PKR2.5bn, which incase of write off, would likely have dented EPS by PKR5.1.

PT upped 10% to PKR450/share: We have revised our EPS estimates for FY12-14 by 10-12% after incorporating flows from Domial-01. We have assumed Domial to flow at 942bpd oil and 11 mmcfd gas and do not incorporate potential upside from Domial-02, already nearing completion.  We have revised up our PT for POL by 10% to PKR450/share. At yesterday’s closing, POL offers a potential upside of 34%, while trades at FY12 PER of 6.1x. BUY

Domial-01 yields 942bpd oil; 11 mmcfd gas

POL announced a large oil/gas discovery at Domial-01 well in Ikhlas block yesterday, yielding 942bpd oil and 11mmcfd gas at testing phase. The well is situated in Ikhlas block in which POL has 80% stake. The discovery shall raise POL’s oil and gas production by 16% and 9% respectively at the flow rates announced at discovery stage and will likely have an EPS impact of PKR6.1/share, 12% of FY12 estimates.

EWT phase has already started; FY12 EPS upped 12%

Extended Well Testing (EWT) from Domial-01 well has already started, using nearby production facilities at Meyal field. The well is currently flowing at a rate approximately similar to announced discovery flows. Early commencement of production from Domial-01 would raise FY11E EPS by a marginal 1%, however, FY12E EPS would rise by a sizeable 12%.

Domial would be a high impact find

Domial would potentially be a very high impact find for POL, given the high working interest percentage (80%) that POL enjoys in the block. Ikhlas block is surrounded by Meyal, Pariwali and Dhulian, all POL operated fields, and thus POL has a strong experience of operating in the area. Further appraisal & development upside at Domial is highly likely given another appraisal well in the same block – Domial-02 – is nearing completion.

Risk of exploration write off has also eased

Discovery in Domial-01 has significantly eased risks of exploratory write offs for POL, as Domial-01 was an expensive well with drilling cost estimated at PKR2.5bn, ~60% of Mar-11 exploration assets. In case of write off, Domial-01 would likely have dented EPS by PKR5.1.

PT upped 10% to PKR450/share

We have revised our EPS estimates for FY12-14 by 10-12% after incorporating flows from Domial-01. We have assumed Domial to flow at 942bpd oil and 11 mmcfd gas and have not incorporated potential upside from Domial-02 for now. We have revised up our PT for POL by 10% to PKR450/share, assuming a 15 year reserve life for Domial-01 at discovery flow rates. At yesterday’s closing, POL offers a potential upside of 34%, while trades at FY12 PER of 6.1x, and offers FY11 dividend yield of 12%. BUY

Economic & Political News

OGDCL bonds issue: roadshows to be held from June 19

The Privatization Commission on Monday announced the schedule for holding roadshows for offloading exchangeable bonds up to 10% of Oil and Gas Development Corporation Ltd in international market. A spokesman said these roadshows will continue from June 19 to June 21 at Abu Dhabi, Singapore, Zurich, London and Hong Kong. The Finance Division and the Privatization Commission are jointly administering the transaction. The Financial Advisory Consortium comprising Citibank, Credit Suisse, J P Morgan and BMA Capital has been assigned the task for the issuance of bonds.

Govt targets 100 wells, 15 new licences in 2011/12

The government has set an ambitious target to drill 100 exploratory wells and issue 15 licences to kick-start upstream petroleum sector in the next fiscal year. The government has also announced concessions to be given on import of machinery and equipment for exploration activities.
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