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SCS Research I Oil & Gas

Friday, 29 July 2022

8%

Exploration Companies ”painted with different

perspective” – Detailed Report
Pakistan Gas industry We have covered following aspects
Snapshot in this sector…
FY21
Pakistan Oil & Gas reserves
Pakistan Oil industry
Pakistan’s Demand vs Production
snapshot
EBITDA Exploration companies Valuation
Company Valuation Exploration player’s divestment into
international venture
Glance on OGDC
FY21 Companies investment in Reko Diq project
OGDC Financial~FY22 MARI’s game changer Bannu West.
Valuation based comparison
Glance on MARI Super Tax impact
MARI’s Financial~FY22
Glance on PPL
FY21
Iqra Nadeem
PPL’s Financial~FY22 Analyst
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8%

FY21

EBITDA

FY21

FY21

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E&P ”painted with different perspective”

Depleting reserves topped with burden of circular debt forced imports to swell...

The concern over depleting gas reserves is gravitating on rising demand. GAS Production (MMCF)
Country’s demand is increasing at an average rate of 2% while gas reserves Annual Production 1,038,777.00
is depleting at an average rate of 15% annually, where recoverable reserve Annual demand 2,400,000.00
Shortfall (1,361,223.00)
of gas linger at 20trillion cubic feet (TCF) from original recoverable reserve
Source: PPIS, SCS Research
of 63trillion cubic feet.
GAS RESERVES (Trillion
8%Cubic Feet)
However, as per USAID (United States Agency for International ORIGINAL RESERVE 63.10
Development) research Pakistan’s un tapped reserves is ~10,159 trillion CUMULATIVE PRODUCTION 43.12
cubic feet (TCF) shale gas and 2,323 billion of stock tank barrels (BSTB) BALANCE RECOVERABLE 19.99
shale oil. Moreover, according to the Energy Information Administration Source: PPIS, SCS Research

(EIA) Shale Gas Assessment Report 2015 (USA); Pakistan has around 105 Local production breakup
trillion cubic feet of recoverable shale gas and 9.1 billion barrels of
recoverable shale oil resources. 25%
34%
The exploration need to be gear-up to tackle upcoming demand for fossil
fuel energy. Meanwhile, we need to import RLNG to cover the difference
between demand and supply, wherein disturbed commodity supply cycle
internationally has took prices of natural gas to its all time high and as per 22%
19%
news Pakistan has recently accepted bid of $38.9/MMBTU.
OGDC PPL Mari Others

Total demand Vs Local Production Source:PPIS, Scs Research

RLNG Importers

37%

63%

FY21
Source:PPIS, Scs Research
Pakistan LNG Limited Pakistan state oil limited
Source:PLL, Scs Research
Since FY15 dependency over RLNG increased on an average of 90%
which could go further to 3,144 MMCFD by FY25. It seems quite difficult Engro Pak
EBITDA
for government to meet increasing energy needs on the back of ever Elengy LNG
increasing demand in the country. Handling Capacity
At present, the capacity of two Floating Regasification Storage Units (MMSCFD) 690 750
(FRSU) for RLNG is more than 1,200MMCFD, while recently there was a Capacity Utilization (MMCFD) 610 600
news FY21
on increasing import of additional 6,944MMCFD by making the (FSRU) vessel 72 N/A
terminal operational before summer of 2023 at Pakistan’s LNG zone. Source: PLL, Scs Reserch
Subsequent to Russian war, Europe natural gas intake shifted towards
Qatar amid spike in prices to an average of USD$33/mmbtu. 3,144
Import RLNG(MMCFD) 2,312
MMCFD

1,700
1,100 1,250
850 900 919
450
250
FY21
55

FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E
Source:PPIS, Scs Research
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8%

FY21

EBITDA

FY21

FY21

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Similarly, Pakistan significantly relies on oil imports. During the Oil Production (Million US Barrels)
year country consumed around 236mn barrels of Oil products~ an Annual Production 21.24
increase of 119%yoy, owning to declining local oil reserves which Annual demand 169.94
lingered at 223mn US barrels. Shortfall (148.70)
Amid, Crude consumption alone accounts to 88mn barrels Source: PPIS, SCS Research

among which 21mn barrels is produced locally(a decline of

OIL RESERVES (Million US Barrels)
22%), the gap is fulfilled by 66mn barrels of imported oil which
ORIGINAL RESERVE 1,219.93
surged by 9% compared to same period last year.
CUMULATIVE PRODUCTION 997.01
During the year there is an abnormal surge in imports i.e. 119% BALANCE RECOVERABLE 8% 222.92
to 215mn barrels in petroleum products. Source: PPIS, SCS Research
Since Russia has invaded Ukraine the prices of crude in
international market has increased by 65%yoy in supplement Industry Snap
to increase in Dollar parity by 11%yoy against local currency. Oil consumption Barrels 215,993,247
Local Crude Production Barrels 21,243,666
The local gas production is at alarming stage where if we haven't Crude Import Barrels 66,426,588
make any productive efforts we might have to be depended on Petroleum Product Import Barrels 149,566,659
imported RLNG which would be expensive and even out of Source: PPIS, SCS Research
affordability for most of local industrial consumers.
At this alarming stage , local players can play
there role by tapping unrecoverable reserve of
15tcf into recoverable reserves. As per our
calculation energy players are well equipped with
exploration and liquid assets if used effectively
can foster local gas production. As per recent oil
industry numbers E&P company’s segment wise
sales are decreasing at an average rate of 12%
annually and companies are only getting Dollar
Source:dps.psx,Scs Research
denomination benefit.
Oil markets remain in backwardation, a bullish pattern that’s marked by near-term prices trading above longer-dated
ones.
GAS Reserves (TSCF) Oil Reserves (million STB) MMCFD BOPD % % PKR bn PKR bn PKR bn PKR bn
FY21 Original Remaining Original Remaining
Gas Oil
Gas market Oil market
Exploration &
Trade Trade Cash +Short
Production Production Development
Reserves Reserves Reserves Reserves Share Share Recievables Payables Investment
assets
MARI 11.60 5.00 6.47 2.45 698.00 2,127.67 29% 4% 30.95 35.36 17.80 31.36
PPL 16.59 1.83 78.00 11.75 646.11 8,927.19 27% 18% 29.86 346.36 74.26 58.60
OGDC EBITDA 7.47 7.19 107.00 96.90 1,033.00 37,677.71 43% 77% 121.00 441.77 87.64 10.02
Source: Company's Financial, SCS Research

The fundamentally sound Pakistani listed companies viz. MARI, PPL and OGDC with recoverable gas reserves of
5TSCF, 1.83TSCF and 7.19TSCF respectively, is currently producing 698MMCFD, 646MMCFD and 1.033MMCFD as
per PPISFY21
industry updates also reported in media. Pakistan desperately is in need of a big structures like Sui,
Qadirpur and Tal block to address an ongoing energy crisis.
Furthermore, as these companies are capital intensive they need a hefty amount for their working capital
requirement. However, these companies viz. PPL and OGDC is also seeing mounting receivables PKR 346bn
and PKR 442bn respectively are currently struggling to meet working capital needs.
Owning investment diversification the consortium (Pakistan International Oil Limited (PIOL)) of Mari
Petroleum Company Limited (MARI), Government Holdings (Pvt,) Ltd (GHPL) and PPL (Operator) has been
awarded offshore block-5 in Abu Dhabi with each consortium company having a 25% equity stake in PIOL.
and recent gold mining project namely “Reko Diq” owned by Government of Pakistan (GoP) and Antofagasta
PLC (investment
FY21 of USD $ 900mn) located at Baluchistan, is a joint mining project between OGDC, PPL and
GHPL will hold 25% of equity in the project divided equally. While 50% of the equity will be held by Barrick
Gold with management and operator rights and remaining 25% of the equity will be held by the Government
of Balochistan (GoB).
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E&P Valuations
PKR PKR bn X % % 3 Year Growth
Share Market PE
Company Price Cap Ratio ROE D/Y Net Profit Sales
OGDC 80.17 347.00 2.20 18% 10.06% 20.00% 14.00%
PPL 69.10 188.00 2.47 17% 4.75% 12.00% 9.00%
MARI 1,701.00 228.00 5.79 31% 7.00% 9.00% 12.00%
Source, Company's financials, SCSReserch 8%
We see growth prospects in OGDC & MARI - amid highest net margins and ROE respectively. Also we see
developments in PPL wherein the company is an operator in ADNOC Block 5.
Comparasion MARI PPL OGDC
EV/EBITDAX (x) 3.74 8.28 6.11
EV/boe (x) 0.30 0.98 0.46
P/S (x) 2.42 0.97 1.03
P/CF (x) 9.41 9.50 8.31
EV/DACF(X) 0.14 0.11 0.11
Debt to equity 32% 38% 24%
RRR 200% 108% 120%
Reserve Life 23.43 8.71 18.96
Source: PPIS, Company's Financials, Scs Research
Indeed, ratio-based calculations can be a valuable indicator that investors can trust to measure the
performance of oil companies. The following metrics provide a complete and accurate overview of the
health of a particular E&P.
EBITDAX in an indicator for exploration companies, used to measure a firm's overall financial performance, while
EV determines the firm's total value. Generally, EV/EBITDA of less than 10 is considered healthy. Hence in this
parameter we found ”MARI” as our best pick.
Enterprise value per flowing barrel (per day) determines the value of the company per barrel of production.
FY21
“OGDC” being largest player stands on this parameter could see a marginal upsurge.
Enterprise Value to Reserves (EV/boe) similar to EV per flowing barrel, but compares the price of a company
with barrels still in the ground. In such parameter “MARI” is valued at lowest multiple compare to its peer which
interpretates stock is trading at discount.
Price to sales ratio (P/S ratio) indicates how much investor paid for a share compared to the sales a company
EBITDA
generated per share. Here we see “MARI” has higher ratio which means that the market is willing to pay more to
gain a return on investment
Price to Cash flow (P/CF) Lower than 10 is considered a good sign for company’s stock value and enough cash
flowsFY21
that are being generated to support the multiple. In this context, “OGDC” is valued better compare to its
peers or in other words OGDC undervalued with respect to its cash flows.
Enterprise Value/Debt-Adjusted Cash Flow (EV/DACF) reflects financial risk inherent within the firm.
Debt to equity reflects company’s debt and equity share in the business. Among all players “OGDC” with least
ratio of debt could be enjoying status of Shariah compliance alongside MARI - in our view.
A Reserve-replacement ratio of 100% indicates that the company can sustain current production levels. The
higher ratio indicates addition of new reserves. Where MARI at 200% implies that - for each barrels produced,
two barrels are added to reserves.
Reserves-to-Production (RPR) commonly used to estimate how many years worth of oil a company maintains. In
FY21
this term “OGDC” enjoys highest worth based on highest reserve life.

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Shareholding
OGDC: Strong Dollar is strengthening earning 3% 2%
Bottom time to Fish OGDC－ Too cheap to ignore
6% 3%

OGDC is one of the largest exploration and production company in

Pakistan’s oil and gas sector (crude reserves 281mn barrels) with
portfolio of 43% oil and 36% gas. The average daily saleable crude oil
accounts to 36,173barrel, gas accounts to 828mmcfd and LPG 822 85%
8%
mmcfd respectively in 9MFY22. In terms of earnings, revenue Gov ernment Financial Institutions
increased by 32%yoy with applauding EPS of PKR 26/sh and cash General Public Foreign Companies

dividend of PKR 8/sh. others

Source: Company’s Financials, Scs Research

The Dollar parity and crude oil prices internationally will post hefty
Major Oil producing Field
gains in OGDC as company’s net profit could increase by 42%yoy
with applauding EPS of PKR 34/sh (incl. super tax) and cash dividend 11,486.63
of PKR 6.85/sh. Out of that PKR 4.75/sh has already been paid
wherein 4QFY22 cash dividend could be of PKR 2.10/sh. The initial

BOPD
earnings estimates were higher but now provision of super tax is
having an annual impact of PKR2/sh on EPS.
2,227.50
Recent Discoveries… 1,168.00 1,268.13
285 204.50
New discoveries throughout the year is expected to yield 2P Chanda Kal Mela Nashpa Rajian Toot
recoverable (677 MMBOE) reserves by 236 BCF of gas and 13mn Source,PPIS, Scs Research
barrels of oil combined with 58mn barrels of oil equivalent.
Major Gas producing Field
OGDC discovered 1400BOPD and 5.02MMSCFD from NIM East-1
located in district of Tando Allah Yar, Sindh province. Here OGDC 1370.61
shares working interest of 95% - as operator.
The incremental impact on earning could be of PKR 0.5/sh in next
MMCFD

FY21
year earnings (calculated as per 2012 petroleum policy 2012 ~ @
420
$2.75/mmbtu at $USD/PKR 185) whereas, additional gain from
173.47
Bannu West would have impact of PKR 0.75/sh, cumulatively.
These discoveries will add PKR 1/sh in following financial year.
Kunner Qadirpur Uch
Moreover,
EBITDA there is also an impact over 1.24MMSCFD of gas from Source, PPIS, Scs Research
Kaleri Shum- 01 well located in Rajanpur (Tribal area) Punjab
province, Pakistan. Dividend Vs Earnings

Production
FY21
40 1 2.00
34
35
OGDC contributes around 77%,43% & 25% towards total oil, natural 30 28
1 0.00

gas and LPG production respectively. OGDC’s declining field of 25 20

11.0 23 21 6.5
8.00
18
PKR

Nashpa, Qadirpur and Chanda left average daily net oil production 20
14 15 6.8 6.9
6.00
15 6.3 10.0
and gas production to 37,678bopd and 1,033MMCFD respectively. 5.2 6.0
4.00
10
However, the new discoveries may arrest the declining ones. 5
2.00

0 -
Financial Result
FY15

FY18

FY22E
FY17
FY16

FY19

FY21
FY20

Given impact of Dollar denomination, OGDC top-line is expected to

FY21
register increased revenue by 42% yoy~ PKR 342bn backed by EPS DPS

Source, Company’s Financials, Scs Research

average realized price of crude oil be US$ 75 - 80/bbl (conservative
estimates). Furthermore, increased exchange rate will strengthen
bottom line by 62%yoy ~ PKR 144bn. www.scstrade.com
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Super Tax
Since the government has imposed 10% super tax on prior year earnings and 4% on current year earnings
in addition to corporate tax of 29%, summing up to 43% tax on total earning. Hence, this company might
report 6% decline in net profit with erosion of EPS by PKR 2/sh.

Future Stance
8%
OGDC diversion in ADNOC’s offshore block5 will boost company’s valuation as consortium has
submitted appraisal plan for 5 undeveloped pre- existing discoveries.
OGDC has deposited $187.7mn as entry fee of Reko Diq project which would be utilized towards
acquisition of 8.3% interest in project. While OGDC’s participation is subjected to administrative
approval.

OGDC Valuation...
Their could be a proposal by UAE for ownership of 10%-20% in OGDC as a secure mortgage against $2bn
loan to boost depleting Pakistan exchange reserves. If accepted by government on ‘buy back basis’ could
bring not only cash into country but it will improve operational efficiency via exchange services of expert
engineers and technology. Recent changes in NAB laws could also bode well in pursuing aggressive
drilling strategies at least in the case of OGDC. The government companies are usually slow in pursuing
drilling.
Probable Bidding
"Positive" as per our methodology* Price (PKR)
EV/sh 123.35
BV/sh 199.75
PE based 204.00
Source, Company's Financials, Scs Research
FY21
*Disclaimer

OGDC’s Financial
PKR FY20 FY21 9MFY22 4QFY22E FY22E ∆yoy
Nets Sales 232,925,243,000 241,131,401,189 240,267,311,000 102,662,934,351 342,930,245,351 42%
Royalty EBITDA (27,626,096,000) (27,283,197,271) (27,092,158,000) (13,346,181,466) (40,438,339,466) 48%
Operating Expense (65,330,327,000) (68,997,133,805) (50,543,152,000) (20,532,586,870) (71,075,738,870) 3%
Transporation Expenses (1,592,125,000) (1,982,219,752) (1,565,556,000) (2,053,258,687) (3,618,814,687) 83%
Gross Profit 138,376,695,000 142,868,850,361 161,066,445,000 66,730,907,328 227,797,352,328 59%
Other income from financial
FY21
and non financial assets 33,816,135,000 13,892,294,765 29,587,438,000 8,935,045,700 38,522,483,700 177%
Exploartion and prospecting expenditure (18,213,438,000) (17,366,187,000) (9,692,628,000) (4,712,275,397) (14,404,903,397) -17%
General and administration expenses (5,070,904,000) (10,379,873,000) (3,370,294,000) (1,534,657,971) (4,904,951,971) -53%
Operating Profit 115,092,353,000 115,122,790,361 166,713,334,000 69,419,019,660 236,132,353,660 105%
Finance Cost (3,011,454,000) (2,204,774,000) (1,733,583,000) (627,914,320) (2,361,497,320) 7%
WPPF (7,597,981,000) (6,788,755,000) (8,944,767,000) (3,375,317,880) (12,320,084,880) 81%
Share of profit in associate - net of taxation 6,062,575,000 6,288,982,000 3,037,881,000 1,572,245,500 4,610,126,500 -27%
Profit before tax 144,361,628,000 126,310,538,126 169,950,492,000 66,988,032,960 236,938,524,960 88%
Taxation (43,423,735,000) (36,974,093,991) (57,906,547,000) (34,737,104,689) (92,643,651,689) 151%
Profit After Taxation 100,937,893,000 89,336,444,135 112,043,945,000 32,250,928,271 144,294,873,271 62%
EPS FY21 23.47 20.77 26.05 7.50 33.55
DPS 7.00 7.00 4.75 2.00 6.50
Source: Company's financial, Scs Research

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Shareholding

MARI: ’Big Shot’ Bannu West could soar earning 22%

Best hedge for inflation…

40%

nd
Considered as 2 largest exploration company in Pakistan after
18%
OGDC now with (+600MMBOE 2P Reserves), currently accounts to
29% of country’s total natural gas supplies while 4% in oil market.
20%
The average daily saleable crude oil & gas accounts to 1,288bopd &
8%
736mmcfd respectively in 9MFY22. In terms of earnings, revenue FAUJI FOUNDATION OGDC L

increased by 32%yoy with applauding EPS of PKR 205.84/sh and cash GOVT OF PAKISATN GENR AL PUBLIC
Source, Company’s Financials, Scs Research
dividend of PKR 62/sh.
Major Oil producing Field
The increasing Dollar parity and crude oil prices internationally will
766.37
post hefty gains on Mari’s net profits where as per our calculation
company may close its financial year with EPS of PKR 258/sh and cash

BOPD
dividend of PKR 127/sh of FY22 (among which PKR 62/sh has already
been paid). wherein 4QFY22 cash dividend could be of PKR 65/sh.
86.37
Recent Discoveries…Bannu West could be game changer 37.40

for MARI Halini Dharian Kalabagh

Source, PPIS, Scs Research
Bannu West-l Well (Mari holds 55%)
Major Gas producing Field
The location Bannu West (South of Manzalai) with estimated
796.27
25mmcfd gas and ~300bbl oil.
The incremental impact on earning could be PKR 40/sh in next
year earnings (calculated as per 2012 petroleum policy 2012 ~ @
MMCFD

$7/mmbtu at $USD/PKR 185).

There is expectation for a sizeable discovery from same block as
perFY21
industry vibes and given potential.
6.37 6.35
Furthermore, the gas from Tipu compartment of the “Goru B”
reservoir was injected into SNGP network at the end of March 2022 Mari Zarghun South Sujjal

via the cross country pipeline. Source, PPIS, Scs Research

EBITDA
Production
MARI contributes around 4% & 29% towards total oil and natural gas Dividend Vs Earnings
production respectively. The flag ship field ‘Mari’ with other fields are 300
258
FY21
producing on an average daily net oil production and gas production 250 227 236

to 2,128bopd and 698MMCFD respectively. However, up coming 200 182

discoveries are said to be sizeable discoveries which could provide 141 127
PKR

150 127
annual incremental impact of PKR 40/share.
100 83
51 55 6
Financial result 50
6
3 5 6
3
The Dollar denominated price is complementing increase gas 0
FY22E
FY17
FY16

FY19
FY15

FY18

FY20

FY21

production have nourished MARI’s top-line which is expected to

register increased revenue by 32% yoy~ PKR 96bn backed by average
FY21 EPS DPS
realized price of crude oil be US$ 70-80/bbl. Furthermore, increased
Source, Company’s Financials, Scs Research
exchange rate will strengthen bottom line by 10%yoy ~ to PKR 34bn.
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Super Tax
Super tax might impact company’s profitability by 5%. The EPS erosion of PKR 14/sh is on cards from
original estimates.

MARI Future Stance

MARI diversification in ADNOC’s offshore block5 will boost company’s valuation as consortium has
submitted appraisal plan for 5 undeveloped pre- existing discoveries. 8%
The Reko Diq one of the world’s largest undeveloped copper and gold deposit containing 12.3 mn tons
of copper and 20.9 mn ounces of gold will unleash company’s growth potential.
MARI has deposited $187.7mn as entry fee of Reko Diq project which would be utilized towards
acquisition of 8.3% interest in project.

MARI: Bannu West impact to spur future valuations...

The proposal by UAE for ownership stake of 10% - 20% as per various unofficial sources in various state
owned entities may also bring MARI into spot light via OGDC stakes. This story is on rounds in Islamabad
and UAE. We do not see any material impact on MARI’s valuation of the aforesaid development.
MARI is only aggressive driller in Pakistan with 2ND highest gas production as per PPIS data disseminated
in the industry.
However, Bannu West discovery is biggest game changer for MARI.

Probable Bidding
"HOLD" as per our methodology* Price (PKR)
EV/Sh 1,806.96
BV/sh 934.89
PE based 1,548.00
Source, FY21
Company’s Financials, Scs Research
*Disclaimer

MARI’s Financial
FY20 FY21 9MFY22 4QFY22E FY22E ∆yoy
Net SalesEBITDA 72,026,368,000 73,018,271,000 67,617,082,000 29,025,731,168 96,642,813,168 32%
Royalty (8,805,560,000) (9,315,126,000) (8,644,087,000) (3,708,154,326) (12,352,241,326) 33%
operating and administrative expenses (13,313,631,000) (15,039,680,000) (11,821,721,000) (5,064,960,012) (16,886,681,012) 12%
Exploration and prospoecting expendiure (10,257,639,000) (4,543,689,000) (4,518,782,000) (1,935,502,640) (6,454,284,640) 42%
Financing FY21
cost (567,952,000) (1,310,476,000) (587,971,000) (249,108,369) (837,079,369) -36%
Other charges (2,698,227,000) (3,082,462,000) (2,629,357,000) (1,125,245,266) (3,754,602,266) 22%
36,383,359,000 39,726,838,000 39,415,164,000 16,942,760,554 56,357,924,554 42%
Other income/expenses 340,001,000 311,971,000 145,571,000 870,771,935 1,016,342,935 226%
Finance income 4,556,085,000 3,940,536,000 2,564,962,000 1,109,570,442 3,674,532,442 -7%
Share of loss in associate - (47,982,000) (2,594,730,000) (580,514,623) (3,175,244,623)
Profit before taxation 41,279,445,000 43,931,363,000 39,530,967,000 16,971,858,081 56,502,825,081 29%
Provision for income tax (10,966,572,000) (12,486,454,000) (12,071,677,000) (9,993,849,467) (22,065,526,467) 77%
Profit for the period 30,312,873,000 31,444,909,000 27,459,290,000 6,978,008,614 34,437,298,614 10%
EPS FY21 227 236 206 52.31 258.15
DPS 6 141 62 65.00 127.00
Source: Company's financial, Scs Research
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Shareholding

PPL: Divestment is the only hope! 8%

8% 9%

Lower production sounds earning alarm but Dollar denomination elated management
7%

A frontline player in exploration and supply of natural gas, currently

accounts to over 27% of country’s total natural gas supplies besides
producing crude oil, LPG and natural liquid gas. Company’s
remaining gas recoverable reserves stands at 1.83TSCF and Oil 68%
8%
reserve accounts to 12mnSTB. The average daily saleable crude oil, Financial institutions Gop
gas and LPG accounts to 11,244bopd, 544mmcfd and 286tons General Public Associated companies
respectively in 9MFY22.In terms of earnings, revenue increased by Others

29%yoy with applauding EPS of PKR 19.19/sh and cash dividend of Source, Company’s Financials, Scs Research

PKR 1.50/sh. Major Oil producing Field

The increasing Dollar parity and crude oil prices internationally will 6,095.38

also post hefty gains on PPL’s net profits as well. As per our
calculation PPL will close its financial year with EPS of PKR 25/sh

BOPD
(inclusive of super tax provision) and cash dividend of 2.50/sh of
FY22 (PKR 1.50/sh has already been paid). 4QFY22 cash dividend is 1,861.60
1,105.26
expected to be ~PKR 1.0/sh.

Expected Discoveries… Sharf Adhi Dhok Sultan

Musakhel Block ( PPL holds 37%) Source,PPIS, Scs Research

Major Gas producing Field

The expected potential discovery could add value in company’s total
reserves by 16bcf. As per updates the well is under inspection and 316.675

expected to be announced in coming year.

Kalat block~Pandrani X-1,( PPL holds 37%) 192.053
MMCFD

PPL hasFY21
started Kalat well drilling last year with estimated discovery 106.143
of 450–900 Mmboe, will complete in next year.
Company need heavy expenditure on exploration activity since PPL
is getting short of its recoverable reserves. Sui Sharf Kandhkot

EBITDA Source,PPIS, Scs Research

Production
EPS Vs DPS
PPL contributes around 18%,27% & 7% towards total oil, natural gas 3 0.00
and LPG production respectively in the perspective of Pakistan. 25
25.00 23
PPL’s declining field of Sui, Kandhkot, and Mazarani left average 20 19
20.00 18 18
daily net oil production and gas production to 8,927bopd and 17
FY21 respectively.
646.12MMCFD
PKR

1 5.00

9 9.0
1 0.00 5.5
Financial result 5.00
4.0 3.5 2.0 3.5 2.5
1.0
The Dollar denominated price gives edge to PPL valuations as its -
FY22E
FY17

top-line is expected to register increased revenue by 29% yoy~ PKR

FY16

FY19
FY15

FY18

FY21
FY20

191bn backed by average realized price of crude oil be US$ 75-80/bbl

(as perFY21
our conservative hunch). Furthermore, increased exchange EPS DPS
Source, company's financial, Scs Research
rate will strengthen companies bottom line by 26%yoy ~ PKR 66bn.

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 Standard Capital
Securities (Pvt.) Ltd REP-033 Ι www.jamapunji.pk
Committed to intelligent investing

SCS Research I Oil & Gas

Super Tax
To add more challenge for company’s survival after mounting circular debt, government has imposed
super tax (Cumulatively 42%) which might impact company’s profitability by 4% - EPS erosion of PKR
1/sh resultantly, we may see lower cash dividend for 4QFY22.

Future Stance
PPL’s diversion in ADNOC’s offshore block5 as operator will boost company’s valuation
8% as consortium
has submitted appraisal plan for 5 undeveloped pre- existing discoveries.
PPL has deposited $187.5mn as entry fee of Reko Diq project which would be utilized towards
acquisition of 8.3% interest in project.

PPL’s Privatisation..
The proposal by UAE for ownership of stakes up to 10%-20% is going rounds these days in government circles.
Government in foreign exchange depletion crisis, is seeking PPL as a secure mortgage against $2bn loan to boost
depleting Pakistan exchange reserves, if accepted by government on Buy back basis could bring not only cash into
country but it will improve operational efficiency via exchange services of expert engineers and technology in our
earnest opinion.

We still think PPL desperately needs foreign hands to improve production of natural gas in the country.

Probable Bidding
"Positive"as per our methodology* Price (PKR)

EV/Sh 105.60
BV/sh 159.36
PE based 150.00
Source, Company’s Financials, Scs Research
*Disclaimer
FY21
PPL’s Financial
FY20 FY21 9MFY22 4QFY22 FY22E ∆YOY
Revenue from contracts & Customers 157,593,092,000 148,429,000,000 140,875,568,000 50,501,848,247 191,377,416,247 29%
less: Operating
EBITDA Expenses (42,760,217,000) (40,077,127,000) (29,289,577,000) (12,120,443,579) (41,410,020,579) 3%
Less: Royalties and other levies (23,798,843,000) (22,057,220,000) (20,600,530,000) (7,504,802,816) (28,105,332,816) 27%
Gross Profit 91,034,032,000 86,294,653,000 90,985,461,000 30,876,601,852 121,862,062,852 41%
Exploration Expensesd (14,733,694,000) (9,674,680,056) (9,964,337,000) (1,469,603,784) (11,433,940,784) 18%
Administration
FY21 Expense (3,072,536,000) (3,741,451,000) (3,041,836,000) (1,666,560,992) (4,708,396,992) 26%
Finance Cost (1,069,908,000) (1,107,072,000) (908,931,000) (321,023,910) (1,229,954,910) 11%
Reversal for doubtful debt - 691,835,000 41,929,000 - 41,929,000 -
Share of profit in associate - net of taxation - - (2,446,912,000) (1,010,036,965) (3,456,948,965) 0%
Other charges (8,138,138,000) (7,384,799,000) (8,886,271,000) (1,912,686,965) (10,798,957,965) -
Other income 6,464,998,000 4,055,713,000 10,411,754,000 7,575,277,237 17,987,031,237 -
Profit before tax 70,484,754,000 69,134,198,944 76,190,857,000 32,071,966,472 108,262,823,472 57%
Taxation (20,228,484,000) (16,150,218,000) (23,992,123,000) (17,497,168,830) (41,489,291,830) 157%
Profit After Taxation 50,256,270,000 52,983,980,944 52,198,734,000 14,574,797,642 66,773,531,642 26%
EPS 18.47 19.47 19.19 5.36 24.54
FY21
DPS 1.00 3.50 1.50 1.00 2.50
Source: Company's Financial, SCS Research

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Securities (Pvt.) Ltd
Committed to intelligent investing
REP-033 Ι www.jamapunji.pk

Disclaimer

‘Research Analyst’ Certification: ‘Research Analyst’ involves in this ‘Research Report’ certifies that:
- ‘Research Analyst’ or any of his close relatives do not have a financial interest in the securities of the ‘Subject
Company’ aggregating more than 1% of the value of the ‘Subject Company’

-Research Analyst or his close relative has neither served as a director/officer in the past 3 years nor received any
compensation from the Subject Company in the previous 12 months 8%

- His compensation will not be related to the recommendations or views given in Research Report

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even so it is possible that not all clients may receive Research Report at the same time given technical glitches or
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‘Research Entity’ Disclosures

-Standard Capital Securities (Pvt.) Ltd. or any of its officers and directors does not have a significant financial
interest (above 1% of the value of the securities) of the subject company.
-Standard Capital Securities (Pvt.) Ltd. employee including directors, officers or associates has not served the
subject company in preceding 36 months.
-Subject Company is not been a client for Standard Capital Securities (Pvt.) Ltd. during the publication of Research
Report
-Standard Capital Securities (Pvt.) Ltd. has not managed public offering, take over or buyback of securities for the
Subject Company in the past 12 months neither receives any compensation from the subject company for corporate
advisory or underwriting services in the past 12 months.
-Standard Capital Securities (Pvt.) Ltd. hasn’t recently underwritten/or not in the process of underwriting the
securities of an issuer mentioned herein. Standard Capital Securities (Pvt.) Ltd. hasn’t have provided/providing
advisory services to the issuer mentioned herein.
FY21
Risk disclosures impeding target price
The Subject Company is exposed to market risks, such as changes in interest rates, exchange rates, changes in raw
material prices. Subject company can also exposed to risk such as derivative transaction or certain regulatory
changes from government authorities.
EBITDA
Rating System
- Standard Capital Securities (Pvt.) Ltd. standardized recommendation structure i.e. positive, Hold and negative,
based on rating system i.e.

FY21
- (Target Price, if any/Current Price - 1) > 10% Positive
- (Target Price, if any/Current Price - 1) < -10% Negative
- less than 10% (Target Price, if any/Current Price -1) Hold
- The time duration is the financial reporting period of Subject Company.

Valuation method
Following research techniques adopted to calculate target price/recommendation
Price to earnings & Price to Book, EV-EBITDA multiple
Discounted Cash flows or Dividend Discount Model or Enterprise Value
FY21

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