Pakistan Petroleum (PPL): 3QFY18 EPS Rs5.6 +56% YoY (+20% QoQ) (In-line with expectations)
- PPL’s revenues in 3QFY18 grew by 29% YoY thanks to 1) higher Arab Light oil prices, up 24% YoY to US$65.6/bbl, 2) currency devaluation, providing support to dollar linked revenues, and 3) upward revision in Sui field’s wellhead gas pricing.
- While revenues were up during the outgoing quarter, PPL’s hydrocarbon production declined by 5%, mainly on the back of lower gas production, we estimate.
- The company in 3QFY18 reported decline in its oil production by around 10%. Oil production declined on account of lower flows from Nashpa and Makori East, down 24% and 19% YoY, respectively.
- Royalties were up 59% YoY (+279bps to 14.6% of net sales) in 3QFY18, attributable to royalties paid to Baluchistan Govt. as part of the agreement of Sui field price revision.
- During the outgoing quarter, PPL’s exploration charges grew by 44% YoY in 3QFY18, mainly owing to dry well costs, we believe.
- While we await management clarity, PPL’s admin expenses grew considerably by 3x YoY to Rs1bn during the outgoing quarter.
- PPL reported other income of Rs2.1bn, up significantly by 74% YoY in 3QFY18. This growth was supported by gain on foreign currency deposit on the back of PKR devaluation against US$ during the outgoing quarter. To mention, PPL has foreign currency deposits of over US$300mn as of Dec 2017.
- We flag 1) long-term volatility in international oil prices, 2) delay in key projects and 3) significant exploration and development cost as key risks for PPL.
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.
Topline Securities is one of the fastest-growing brokerage houses in Pakistan. It has strong Equity Brokerage, Economic/ Equity Research, Commodity Trading and Corporate Finance & Advisory functions.
Topline Securities has been endowed with numerous awards by renowned international financial organizations. The highlights of which consists of the award for ‘Best Local Brokerage House of Pakistan’ by Asiamoney Brokers Poll (the largest Asia-focused equity services provider poll) in 2016 and ‘Best Equity Brokerage House’ by CFA Society Pakistan in 2015.
Previously, Topline Securities held the title for ‘Best Brokerage House’ for 4 consecutive years (2011-2014) by Asiamoney Brokers Poll. Other awards include the ‘Best Salesperson’ award by Asiamoney for 6 consecutive years (2011-2016), the ‘Arabia Fast Growth 500’ award and ‘Pakistan Fast Growth 100’ award in 2012 and 2013 by AllWorld Network.
JCR-VIS, a credit rating agency providing independent rating services in Pakistan has assigned initial rating of “A-2” for short term and “A” for long term to Topline Securities. Topline Securities is registered as Underwriter, Book Runner and Research Entity with Securities & Exchange Commission of Pakistan (SECP).
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