Pakistan Oil & Gas: Rolling in the deep, (AKD Daily, Mar 09, 2020)
AKD Daily
Pakistan Oil & Gas: Rolling in the deep
- Following the failure of OPEC+ talks to yield any consensus on output cuts and resulting measures adopted by the Saudi national oil company Aramco (cutting crude delivery rates to Asia and US), crude benchmarks tumbled drastically (Brent ~31%) the most since the 1991 Gulf War.
- Already in the midst of pricing downsides from the spread of COVID-19 beyond China, OPEC+ nations were working towards extending the existing ~1.7mn bpd production cut through to CY20, with additional cuts of 1.5mn bpd from June’20 onwards.
- With no OPEC+ deal on the horizon, previous cuts of 1.7mn bpd agreed upon by the 23 country cartel will likely expire unleashing significant supply upswing, while the spread of COVID-19 effectively lowers the floor on crude benchmarks further.
- Increasingly volatile crude benchmarks (FY20TD Arab Light Average of US$63.96) have played a drastic role in E&P sector price performance, where -US$5/bbl shift in oil price can cut our EPS estimates for OGDC,PPL,POL by PkR1.4/1.1/4.5/sh constituting ~6/5/8% of average annual earnings.
- We are closely assessing the impact of COVID-19 and resulting implication for crude to downgrade earnings and fair value estimates for E&P universe, where positive spillovers on macro metrics at home could buoy sentiment going forward.
AKD Research
Oil and Gas Development Company is a petroleum exploration and production (E&P) company in the Pakistan oil and gas sector. Co.'s principal activity is to explore, develop, produce and sell oil and gas resources and related activities. Co. also manufactures Gas, Liquefied Petroleum Gas, Crude Oil, and Sulphur. Co.'s major fields contributing in the aforesaid production of crude oil include Nashpa, Kunnar/KPD, Pasakhi, Sinjhoro and Rajian and for gas include Qadirpur, Uch, KPD, Nashpa and Dakhni. Co. carries out exploration and development activities on its own as well as in joint ventures with other oil companies.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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