The search activities of exploration and development companies for new hydrocarbon reservoirs in Pakistan has started to show some signs of recovery as 12 exploratory wells were drilled in the first eight months of FY12 as against seven wells spudded in the same period last year, analysts said. "Though encouraging, the activity levels are still far below the levels witnessed in FY05-08", they added.
"The heightened security environment particularly in KPK and Balochistan along with the strained liquidity position because of notorious circular debt have cautioned the oil and gas explorers to remain conservative in their drilling approach", Nauman Khan, an analyst at Topline Securities said.
Their focus continues to remain on maximising production profile of their existing fields while minimising their risk through Joint Ventures, he said adding that the sector drilled 19 development/appraisal wells similar to number witnessed last year. "Though we expect exploration and development (E&P) activity to remain subdued in coming days, but we maintain 'Over-weight' stance on the sector on account of favourable pricing scenario and sector's ability to yield optimal production profile from existing reservoirs", Nauman said.
During the eight months of FY12, the sector has drilled a total of 31 E&D wells accomplishing only 41 percent of the full year target of 76 wells, faring a little better than last year. In the same period last year, the sector accomplished only 33 percent of its target of 80 wells while ended up completing only 60 percent of the target in the full year.
The bifurcation of the numbers further reveal that activity is slanted towards development wells with 19 development well drilled versus the full year target of 45 wells. On exploratory front, 12 wells have been spudded as against target of 31 wells in FY12. Amongst the listed companies, POL is in the process of drilling two exploratory well however, it has not drilled any development well so far in the year. The company's Dhulian Deep-01 is in the testing phase and any positive news flow can positively affect the company's profitability going forward. PPL is on the other end of the spectrum has not initiated any new exploratory well while has drilled only one development well in its own operating lease. However, company has a share in additional four wells through its joint venture (JV).
OGDC, country's largest explorer, seems to be the hardest hit by the circular debt. The company initiated only one new exploratory block against the target of 12 wells and has spudded seven development wells against the target of 15 wells. As regards to new discoveries, this year so far has remained uneventful for the listed sector. A total of four discoveries, predominantly gas with small discovery size, so far have been announced in the year all from carry over wells of last year. The major excitement of the year has come from discovery of augment in reservoir size from Tal and Naspha block, with PPL and POL standing as prime beneficiaries, Nauman said.