Pakistan Petroleum Limited has been in the business for more than seven decades, contributing about one fourth of total gas supplies, besides producing crude oil, condensate and LPG. The company is a frontline player in the energy sector since 1950s.
The current capital structure of the company consists of 71.05 percent shareholdings of GoP, 7.36 percent of PPL employee empowerment trust, and 21.59 percent of private investors. In order to accelerate the pace of privatisation, another 2.5 percent of government holding are to be divested via domestic stock exchanges sometime during the ongoing year.
PPL in the E&P Industry
Presently PPL's share in the country's total natural gas production stands around 24 percent. The company operates the largest gas field at Sui and five others at Kandhkot, Hala, Chachar, Adhi, and Mazarani. It holds working interest in 12 partner operated fields including Qadirpur, Sawan, Nashpa, Latif etc. PPL-operated fields produce an average of 1 bcfd which is sold to the company's main clients: Wapda, SSGC and SNGPL.
During the year FY12, PPL participated in Iraq's fourth licensing round and successfully acquired Block 8 as an operator. In addition, the company is also moving ahead with the acquisitions of MND Exploration and Production Company, a wholly owned subsidiary of a Czech Republican group.
The exploration portfolio of the company consists of 35 exploration blocks including offshore block Indus-G. Pakistan Petroleum Limited is the operator in 19 of them, while it has working interest in 15 of them as well.
These numbers also include the exploration license in Yemen, which is a joint venture between PPL, OMV and Yemen General Corporation for oil and gas. However, due to security issues, progress in this regard has been halted completely in recent times.
Upstream Sector 1HFY13
Six months gone, and six more to go. Though production glitches smeared the optimistic gas production forecasts made after a fine FY12, the exploration and production sector is no dark horse.
The performance of the listed upstream sector consisting of OGDC, PPL and POL, during the first half of the current fiscal year has been modest, especially amid stagnant crude oil prices of around 106 dollars per barrel and deteriorating domestic economic environment.
The overall revenue growth of the three largest and listed players in the industry, representing a colossal share of the market, surged by 18 percent year-on-year to Rs 175 billion during 1HFY13, whereas the bottom line of the three major E&P companies escalated by 19 percent YoY.
Performance highlights for 1HFY13
Gas production by the country's third largest E&P Company has hit a snag, but the promising oil flows have been able to keep PPL buoyant. This was the story for 1HFY13. Despite the deteriorating gas production, once a major in the company's sales mix, first half of FY13 ended on a positive note.
Sales mix for PPL is moving towards oil, and the performance of the company during 1HFY13 mostly banks on the same. The top line of the company grew by a moderate 16 percent year-on-year. This increase was propelled by an approximate 19-20 percent increase in oil production primarily from the non-operated fields of PPL.
Like 1QFY13, Nashpa played a major role in pushing up oil flows during 2QFY13 on the production front, contributing profoundly to the sales growth as gas flows remained stunted. Other contenders for a boost to the total oil production include the Tal Block and Adhi field. Moreover, the depreciation of rupee further helped oil sales.
Some relief to the gas production came with better hydrocarbon prices. Gas production weakened during 1QFY13 by nine percent YoY due to strained production flows from Sui, Sawan and Kandhkot.
Analysts at Topline Securities Pvt Ltd conclude that gas production has faltered by two percent YoY in 1HFY13. Where the gas flows did not do much during the aforementioned period, some volumetric decline was offset by increase in gas well head prices.
Signing off on a buoyant note, the bottom line took the hint from the accretion in the top line and expanded by 11 percent YoY during 1HFY13. Besides sales, reduced other operating expenses and better cash and investment position also supported the bottom line.
The revenues and profits might not be whopping as of now with the secondary offering looming over, but the company has its hopes pinned to the combo of expected increase in gas well head prices and incremental volumes from Makori East and Nashpa joint ventures.
These will act as triggers to the company's growth plans concerning the acquisition of MND Pakistan, the interest shown in Tullow, development of the block acquired in Iraq, and the acquisition of a field in Bangladesh.
Outlook
During FY12, the company and the E&P sector benefited massively from the high international oil prices as well as depreciating currency. The expectations for FY13 seem realistic as most of the profitability during 1HFY13 hinged upon production accretion.
The simple formula for the E&P sector's profitability in 1HFY13 has been the combination of higher oil production and eight percent year-on-year rupee depreciation versus the dollar. Amid the entire clamour about rupee losing its value, the depreciation of the currency has been acting as a cushion for the profitability of the sector.
Recently, after a period of some stability, the oil price in the last two months has shown extreme volatility. From as high as $117 per barrel in February 2013 to as low as $106 per barrel, the Arab light crude oil has become a source of concern for the investors who seem bewildered about the future price direction.
However, this might be of little concern to PPL as the near term outlook rests primarily on volumetric additions rather than oil prices.
This is rightly so, because the long-term prospects for production flows are sanguine for the E&P companies. Moreover, the ECC has approved to increase the cap on Qadirpur gas price from 2.5618 dollars per mmbtu to 3.0116 dollars per mmbtu which is good news particularly for OGDC and PPL.
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Pakistan Petroleum Limited
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Bloomberg Year of Listing
Sector KSE_Ticker Reuters Code Ticker Year End Face value at KSE Latest Price
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Oil and Gas PPL PPL.KA PPL:PA June 10.00 2004 175.00
52-weeks High Low Year to date High Low Share Free Market Cap Rs(mn)
outstanding Float
229.17 171.14 186 171 1643.1 (mn) 20.78% 287,541.63
Market Cap USD mn EPS FY12 EPS 1HFY13 P/E (%) trailing ROE (%) ROA (%) Book Value/ Latest Payout Cash Bonus
Shares
2,926.63 31.13 13.58 6.10 32 24 95.15 50% -
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Pakistan Petroleum Limited
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Ratios 1HFY11 1HFY12 1HFY13
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Net Profit Margin % 44.4% 44.4% 44.0%
ROE % 18.2% 17.9% 15.9%
ROA % 13.8% 13.4% 11.8%
Current ratio 3.72 3.05 4.24
Fixed asset turnover times 0.87 0.98 0.86
Total asset turnover times 0.31 0.30 0.27
EPS Rs/share 12.64 12.24 13.58
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