Pakistan Oilfields Ltd – EPS of PKR21.92 likely in 1HFY11

Robust 2Q earnings to take 1HFY11 EPS to PKR21.92: POL’s board meeting to consider 1HFY11 results will be held on January 28, 2011. We expect the company to post profit after tax of PKR5.19bn (EPS: PKR21.92) for 1HFY11, up 56% YoY. 2QFY11 EPS will likely clock in at PKR12.48, up 56% YoY. We also expect the company to announce DPS of PKR12 with half yearly results.

Strong volume growth; realized prices to fall due to higher gas volumes: Despite rising by a mere 4% QoQ, 2QFY11 volumes for POL shall be up a staggering 41% on YoY basis due to low base effect (2QFY10 had only partial impact of Manzalai expansion). Realized price, though up  4% QoQ, shall be 4% lower on YoY basis due to higher share of gas in revenue mix.

Other income to jump owing to dividend income from NRL and APL: 2QFY11 EPS shall form 29% of our FY11E EPS, as POL shall realize 91% of its FY11E dividend income during the quarter. We expect 2QFY11 other income to rise 30% YoY.

Exploration cost could rise QoQ: While we expect 2QFY11 exploration cost to rise by 43% QoQ due to higher seismic acquisition, it shall still be 71% lower on YoY basis.

Maramzai commences; oil and gas flows from Tal rise 20%/10% WoW: 1st week flows indicate production from Maramzai could be in the vicinity of 40mmcfd gas and 1500bpd oil, 14% and 22% higher than our respective oil and gas production assumption from the well. We, however, maintain our estimates for now.

Strong volume growth; realized prices to fall due to higher gas volumes

Despite rising by a mere 4% QoQ, 2QFY11 volumes for POL shall be up a staggering 41% on YoY basis due to low base effect as 2QFY10 had only partial impact of Manzalai expansion.

Cumulative oil and gas production from Tal during 2QFY11 is estimated at 305mmcfd gas and 7408bpd oil, 1.1x and 1.3x higher on YoY basis. However, due to gas heavy Tal expansion, share of gas in total revenues is estimated to have increased from ­­29% in 2QFY10 to 35% during 2QFY11, dragging average realized price by 4% YoY during 2QFY11, despite 12% higher oil prices.

Other income to jump owing to dividend income from NRL and APL

POL will likely book its share of FY10 final dividend from NRL (PKR400mn) and APL (PKR81mn) during 2QFY11 as a result of which 91% of FY11E dividend income would be realized during the quarter. As a result, 2QFY11 EPS shall form 29% of our FY11E EPS. We expect 2QFY11 other income to rise 30% YoY.

Exploration cost could rise QoQ

We expect 2QFY11 exploration cost to rise by 43% QoQ due to higher seismic acquisition. POL acquired 113 line km of 2D seismic during 2QFY11 as opposed to a mere 7 line km during the previous quarter. 2QFY11 exploration cost shall still be on the lower side – down 71% YoY – and comprise 9% of our full year exploration cost estimate as no dry well shall be expensed during the quarter. 

Maramzai commences; oil and gas flows from Tal rise 20%/10% WoW

As per the production data for the week ending January 11 released yesterday, volumes from “Manzalai + Manzalai CPF” – which reports production from all Manzalai wells, Maramzai, and Mamikhel – rose by 35mmcfd gas and 1545bpd oil over the previous week. Comparison from a week earlier breeds an increase of 41mmcfd gas and 1556bpd oil, indicating production from Maramzai could be in the vicinity of 40mmcfd gas and 1500bpd oil, 14% and 22% higher than our respective oil and gas production assumption from the well. While we maintain our estimates for now, we eye a potential upside of 1-2% to our FY11-13 EPS, incase Tal block sustains the latest reported production levels, which were 2% higher than our 2HFY11 estimates for gas and 7% higher for oil.

Economic & Political News

Cement prices rise to PKR340/ bag

Cement prices in the southern part of the country have increased by PKR10/ 50kg bag. An industry official revealed that the latest price hike has taken average cement prices to PKR340/ bag in Karachi and other cities in Sindh. However, prices remained unchanged in Punjab, Khyber-Pakhtunkhwa and adjoining areas. “The average price of a cement bag in Punjab is PKR315 to PKR320 right now,” a representative of Pakistan Cement Manufacturers Association.  On Wednesday, coal prices jumped by about 5% in international trade to reach USD138.5/ ton.
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