Report

PPL: Margand; a potential game changer

There’s a lot of excitement in the E&P sector after PPL announced it’s first discovery in Margand Block. This is the second discovery in Kalat Plateau, and substantially enhances the play’s attractiveness for future exploration, potentially leading to big discoveries. Margand structure in itself is estimated to hold sizeable reserves. Given the significance of the discovery we have tried to gauge the potential of Margand X-01 in the most objective manner possible. 

  • Margand X-01 can potentially be a +2 tcf discovery; augment PPL’s reserves life by 7-9 years and substantially augment EPS & valuations

‒Our estimates based on comparative analysis of country’s major gas fields indicates that estimates for Margand’s reserves could potentially vary between  2.2 – 3.0tcf, which can possibly increase PPL’s reserves life by 7-9 years. 

‒We estimate that the field could potentially reach flows of 400-600mmcfd in 5-7 years. Assuming a production flow of 400mmcfd at a PKR/USD exchange rate of 155 and Oil prices of USD 60/barrel, EPS impact of Margand comes to PKR 15.90, which is c.71% of FY20E EPS. The block is located in Zone II and is priced under PP12.

‒Early monetization of the field, however, remains a challenge given lack of infrastructure, difficult weather conditions and challenging terrains of Baluchistan. It could potentially take up to 2-3 years before any material flows can be produced from the field.

‒Maragnd’s Net Pay (the portion of a reservoir that contains economically producible hydrocarbons) is c.10x the avg. net pay of gas producing fields in the country. This will likely augment production levels with fewer developmental wells.

  • The discovery has significantly de-risked the region for PPL

‒Margand discovery holds great potential for PPL as the discovery has significantly de-risked the region and opened avenues for exploration in Kalat Play, a previously unexplored region.

‒Margand blocks borders Kalat Block that is also fully owned by PPL. On the northern side lies Ziarat block (PPL’s share is 40%; Operator: MARI), where a discovery of Bolan East has already been announced. All these blocks lies on the Kalat Play.

  • A new life for Pakistan E&Ps

‒Reserves replacement ratios for Pakistan E&Ps have recently been well below 100% as known E&P plays became saturated leaving little room for any major discoveries.

‒Majority of drilling activities in the country so far have been concentrated in Potohar Plateau, Kohat Plateau and Indus basin. Even the old discoveries in Baluchistan like Sui, Loti, Uch and Pirkoh were situated very close to the border of Sind.

‒Margand or Kalat plateu, is situated in interior Baluchistan which has previously been neglected by the sector and Margand discovery will attractive massive future investment in the region just like it happened in Kohat plateu in the early 2000s.

Underlying
Pakistan Petroleum Ltd.

Pakistan Petroleum Limited (PPL) is a supplier of natural gas. The Company is principally engaged in conducting exploration, prospecting, development and production of oil and natural gas resources. The Company operates nine producing fields, which include Sui, Kandhkot, Adhi, Mazarani, Chachar, Adam, Adam West, Shahdadpur and Shahdadpur West. It has working interests in approximately 20 partner-operated producing fields. Its partner-operated fields include Qadirpur Gas Field, Tal Block, Miano Gas Field and Sawan Gas Field. The Company, along with its subsidiaries, has a portfolio of approximately 40 exploration blocks, of which over 20 are operated by the Company, including Block-8 in Iraq, while approximately 20 blocks consisting of three offshore leases in Pakistan and two onshore concessions in Yemen are operated by joint venture partners. Its gas production from its operated and partner-operated fields is approximately one billion cubic feet of gas per day.

Provider
Akseer Research (Pvt) Limited
Akseer Research (Pvt) Limited

Akseer is a Research & Analytics firm based out of Pakistan that specializes in Equity Research and Corporate Finance. Our team has exposure to a wide range of sectors including Economy, Banking, Telecommunications, Retail, Real Estate, Construction and Materials, Pharmaceuticals, Food, Energy, Chemicals and Petrochemicals. We have experience of covering companies in Middle East, Americas, Far East and South Asia.

Analysts
Muhib Ur Rasool

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