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PPL - FY23 Analyst Briefing takeaways , (AKD Off the Analyst's Desk Nov 15, 2023)

AKD, Off the Analyst's Desk

PPL - FY23 Analyst Briefing takeaways

 

Pakistan Petroleum Ltd (PPL) held its analyst briefing today to brief investors about FY23 financial results and shed light on the future outlook:

 

• Company’s total production reached 815MMCFD in FY23 (vs. 808MMCFD last year), primarily driven by the increased offtakes from Kandkot and Dhok Sultan.
• With regards to work programs, company drilled 3 exploration wells (2 partner operated) alongside 5 development wells (2 partner operated). Company is planning to acquire further blocks to remedy the falling exploration and prospecting program.
• Company is planning 9 exploration wells and 6 development wells for FY24, leading to total capex of PkR36bn for the year.
• The recent upward revision in gas prices is favorable from a cash flow standpoint, positively impacting company’s collection rate.
• Company is actively pursuing diversification efforts to increase revenues from other strategic investments i.e. Reko Diq Project and Barite/Lead/Zinc and other mining ventures.
• Company is pursuing GoP to convert the payment of royalties and levies from an accrual basis to a receipt basis.
• Most of company’s assets are mature and suffer from natural declines (8-10% annually), which is the case throughout the industry. Company is actively pursuing new production through additional discoveries.
• Award of Sui D&P lease is pending and discussions are ongoing between the province and the Federal Govt.  Company has applied to the GoP for the grant of formal D&P lease or allow further extension to continue production from the same. Company will have to pay additional 10% levy on well head price as lease extension bonus once approved.
• Cost of hiring security has gone exponentially upwards in past few years, mostly for areas in Balochistan and other frontier regions. The security situation impacts the viability of many of the company's upcoming projects, and company is in discussions with LEAs in this regard.
• Reko Diq’s feasibility study is expected to be completed by end CY24, with mining revenues expected to commence by CY28. The valuation and divestment of the project is ongoing and currently in progress.
• With regards to PIOL, the consortium will begin by drilling 5 exploration wells in Jan’24 (combination of exploration and appraisal wells).
• The country holds considerable potential in shale and tight gas resources. Investment in these complex plays are highly capital intensive and number of wells need to be substantial to achieve financial viability
• With regards to Adhi’s water disposal issue, the reservoir holds substantial potential for oil production, albeit accompanied by a significant amount of water. Company is trying to drill a water disposal well in the area.
• Company is very optimistic on offshore drilling, especially in Indus Block-C area. These are high risk and high reward areas, and company is looking for potential farm-in opportunities to mitigate the risk with the addition of partners.
• GoP will begin auctioning large number of offshore blocks (both shallow and deep water) soon. Management will be actively looking to participate in the said awards.

 

 

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