PPL: Outlook for production growth strengthened by future plans
​PPL’s annual accounts corroborate our outlook, that PPL will witness meaningful production growth in FY17/18 on the back of hefty development capex, and it will ramp up exploration in frontier areas. We remain Neutral on PPL and maintain our estimates (TP of PkR190; total return 12%).
It is noteworthy that PPL’s capex is on the rise with major additions in Adhi, Gambat South and Sui, along with 77% more wells drilled in FY16; more capex will follow in FY17/18F. We thus expect PPL’s oil/gas production to jump 13%/4% YoY in FY17F.
PPL has also demonstrated operational and cost efficiencies, reducing both service costs and drilling time, which will fuel greater activity in future, in our view. That said, rising capex amid burgeoning circular debt concerns may put pressure on payout.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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