In Focus: Pakistan Oil Fields (16052008)

Fair Value: Rs409
POL had recently announced its 9 months results, where the company had posted PAT of Rs5.42 bn translating into EPS of Rs27.5, showing enormous growth of 18.9 percent over same period last year. The enormous growth in bottom line earning of the company is mainly backed by substantial increase in international oil prices during period under review.
Investment Rational
During 9M08, top line of the company had increased to Rs12.13 bn from Rs10.97 bn, resulting in extensive growth of 10.6 percent over corresponding period last year. This was primarily due massive upsurge in international oil prices, which is averagely increased by 43.4 percent to $83.3 per bbl (average Arab light during 9M08) from $58.1 per barrel in 9M07. This increase in oil prices had even offset the impact of decline in oil and gas production during the period.
Massive decline in oil and gas production of the company had registered during 9 month of current financial year, oil production decline to 5,336 bpd from 6153 bpd, depicting 13.3 percent decline over same period last year which is mainly due to continued problems at Pindori field. In addition, gas production of the company had decline by 5.5 percent over corresponding period last to 46 mmcfd, due to substantial decline in gas production from Pindori & Meyal fields. However, TAL block production had increased during the period and further improvement in the production is expected in near future.
Further, healthy dividend income from NRL and APL other income of the company had increased to Rs693mn against Rs548mn in 9M07have further supported bottom line of the company during current finical year.
Going forward, POL is expected to realize capital gain of Rs1,815 mn from the sale and re-purchase of Attock Petroleum Ltd shares, owing to relief from capital gain tax which is expected to abolish during current year, presently company has 3,368,400 shares. We are expecting that the transaction would increase earning of POL by Rs 9.21 in FY08 (considering average sale price of Rs540), resulting increase in full year EPS expectation to Rs45.30 previously Rs36.09 excluding capital gain impact.