PKR Depreciation to Keep Earnings Buoyant
We are revisiting our valuation for Pakistan Petroleum Limited (PPL) after incorporating its 2QFY18 results, PPIS’ latest reserve data, revised assumption on Arab Light prices and PKR/USD exchange rate forecasts. Our new target price for December 2018, clocks-in at 225.90/share, providing an upside of 5% from the last closing price, thus we are maintaining a Neutral stance on the scrip. The company posted higher than expected exploration expenses on the account of four dry wells booked during the quarter, which was mitigated by exchange gain booked by the company on its significant foreign currency denominated term deposits. We expect similar exchange gain to be booked in 3QFY18 as well. Our assumed revision of TAL block’s gas pricing and incorporation of PPIS’ reserve data will have a minimal impact on the company’s valuation.
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.
Ismail Iqbal Securities (Private) Limited (IISPL) is a TREC holder of the Pakistan Stock Exchange, as well as an SECP registered Underwriter and Book Runner. IISPL provides comprehensive financial services including Equity Sales, Research on Equities and the Macro-Economy, Investment Advisory, Portfolio Management, Corporate Finance, and extensive services for Private Equity investors. IISPL services a diversified client base, from Institutional to Retail Investors including High Net worth Individuals.
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