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Insight

PakistanOilfieldsLimited

POLPA
Stockprice

370.4

ProfitshitbylowArablightoilprices&drywells

Targetprice

478.6

Source:CompanyAccounts&TSLResearch
Depressedcrudeoilpricesdamagedrevenuestreamin2Q
28%QoQdipinbenchmarkArablightcrudeoilpricestoaverageUSD74.65/bblin2QFY15coupled
with~3%subduedcrudeoilflowsto6.4kbpddraggedPOLrevenuesin2Q.Dropinoilproductionis
primarilyduetolowerproductionfromMakoriEast(down7%QoQto2.9kbpd)in2QFY15.How
ever, on the positive side, support came from 19% QoQ healthy rise in LPG production from Tal
block, which significantly boosted sales of POLGAS (~26% of net revenues) by 25% QoQ to
PKR2.1bn.Overall,revenuesofthecompanydeclinedby18%QoQtoPKR8.1bnin2QFY15.

Nonrecurringcosts&exchangelossescaused72%fallinPAT

330.1
0.9
471.2
361.9

PKRbn
FY17F
32.7
9.3
2.4
17.5

Otherincome

1.7 3.8 2.0 2.3

PAT

12.9 9.0 10.5 11.2

Keymatrices

FY14A FY15E FY16F

EPS

54.48

38.05

44.48
47.28

DPS

52.50

35.00

39.00
44.00

BVPS

148.8

150.7

152.9
155.3

P/E(x)

6.8 9.7 8.3 7.8

P/BV(x)

2.5 2.5 2.4 2.4

FY17F

DividendYield

14%

9%

11%

12%

Earningsgrowth

19%

30%

17%

6%

ROA

23%

16%

18%

19%

ROE

38%

25%

29%

31%

EV/EBITDA

3.29 4.78

4.36

4.10

PricePerformance
740

POL

690

KSE100INDEX

640
590
540
490
440
390
340

Besides depressed crude prices, outrageous rise in exploration costs by 8.7x QoQ to
PKR2.8bn dampened earnings in 2QFY15. This sharp rise is attributable to expensing out of dry UsmanRiaz
wells namely Malgin in Tal block and Bhangali3. Conjointly low profitability of core operations, usman.riaz@taurus.com.pk
otherincomealsoremainedsubduedatPKR110mn,aheftydeclineof87%QoQin2QFY15,owing Direct:+922135216403

Feb15

QoQ
18%
1%
25%
873%
87%
72%
72%

46%

Dec14

2QFY15
8,078
2,133
4,457
2,799
110
1,180
4.99

Oct14

1QFY15
9,845
2,150
5,962
288
830
4,167
17.62

88

1.7 3.8 2.0 2.3

Aug14

1HFY15 YoY
17,923
0.5%
4,282
12%
10,419
4%
3,087
266%
940
36%
5,347
23%
22.60
23%
15.00 25.0%

237

Explor.Cost

Jun14

1HFY14
17,837
3,814
10,060
844
1,470
6,905
29.19
20.00

29.2%

Currentupside/(downside)

Apr14

PKR(mn)
NetSales
Oper.Costs
GrossProfit
Explor.Costs
OtherIncome
PAT
EPS
DPS

TSLResearch

BUY

Despitehigherproduction, profitability of PakistanOilfieldsLimited(POL)remained Outstandingshares(mn)


incheckin1HFY15duetolowcrudeoilpricesandhigherexplorationcosts.Duringthe MarketCap(PKRbn)
half year, POL has reported 23% decline in earnings to PKR5.35bn (EPS PKR22.6) Freefloat
while2QFY15profitsplummetedby72%QoQtoPKR1.2bn(EPSPKR4.99).Theresult 3MAvg.dailyvaluetraded(PKRmn)
announcementwastaggedalongwithafirstinterimcashdividendofPKR15/share. 3MAvg.dailyvolume(mn)
During1HFY15, crudeoil production grew by 16% whichwasprimarilydriven by en 3MHigh
hancedflowsfromMakoriEast(Talblock)andAdhifield.However,19%YoYdecline 3MLow
inaverageArablightcrudeoilpricesoffsetthepositiveimpact.Moreover,hefty2.7x
riseinexplorationcostsdamagedtheprofits,sincecompanyhaswrittenofftwodry Keyfinancials
wellsin2QFY15.
Yearend
FY14A FY15E FY16F
Though1HFY15resultsremainedunimpressive,futureprofitsarelikelytoimproveon Revenues
35.5 32.0 31.6
thebackofnormalizedexplorationcostsandstabilizingcrudeoilprices.ForFY15,we Oper.Cost
7.6 9.1 9.5
expectearningstoclock inatPKR38.1/share.Thus,wereiterateourBUYstanceon Amor. of D&D Cost 5.2 3.2 2.4
Grossprofit
19.0 16.3 16.5
POLwithDec15TPofPKR479/share.

Feb14

OilandGas

March6,2015

Continuedonpage2
DISCLAIMER:Theaboveinformationandadviceisgiveningoodfaith,withoutanylegalresponsibility.TaurusSecuritiesLimitedorindividualscon
nectedwithitmayhaveusedresearchmaterialbeforepublicationandmayhavepositionsinormaybeinterestedinthesecuritiesmentionedherein.

Insight

TSLResearch

to exchange losses of PKR160mn vs. PKR232mn gains in the preceding quarter. Apart from the
exchangelosses,absenceofpayoutsfromNRL(25%ownedassociate)alsoadverselyaffectedthe
otherincome.Asaresult,profitsin2QFY15fellby72%toPKR1.2bn(EPSPKR4.99).

Oilpricesandoperatingexpensesknockedearningsdownin1HFY15
During1HFY15,revenuesremainedstableatPKR18bn.Duringtheperiod,crudeoilflowsimproved
by16%YoYto6.5kbpdinadditiontorisingLPGproductionfromTALBlock(postcommencement
of operation of Makori GPF). However, 19% tumbled average crude oil price coupled with 10%
drop in gas flows neutralized the impact of improved hydrocarbon production (exgas flows).
Moreover,companysexplorationcostssurgedby2.7xYoYtoPKR3.1bnwhileotherincomeplum
metedby36%YoYtoPKR940mn.Consequently,bottomlineofthecompanyknockeddownto
PKR5.3bn(EPSPKR22.6)comparedtoPKR6.9bn(EPSPKR29.19)inSPLY.

AbouttheCompany
PakistanOilfieldsLimited(POL),asubsidiaryofTheAttockOilCompanyLimitedwasincorporated
onNovember25,1950.AttockGroupowns54%ofPOLsshares.Thecompanycurrentlyownsand
operatesfourexplorationlicensesandninedevelopmentandproductionleases.Italsoholdsnon
operatinginterestin4explorationlicensesandninedevelopmentanddevelopmentandproduction
leases.
Inadditiontoexplorationandproductionofoilandgas,CompanyalsomanufacturesLPG,solvent
oilandsulphur.POLmarketsLPGunderitsownbrandnameofPOLGASaswellasthroughitssub
sidiaryCAPGAS(Private)Limited.POLhasa25%shareholdinginNationalRefineryLimited.Further
more,alsooperatesanetworkofpipelinesfortransportationofitsownaswellasothercompanies
crudeoiltoAttockRefineryLimited.
ThecompanyalsooperatesaBarytemineinBaluchistanprovince.Itproducesoilwelldrillinggrade
Barytepowderfromthemine,whichhasprovenreservesof1.25milliontones.

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