Oil and Gas Development Company (OGDC): We raise our OGDC earnings forecast by an average of 59% over FY22-24 after incorporating revised oil price assumption and 1HFY22 results. However, we have slightly increased our exploration cost estimate of the company for FY23/24. OGDC overdue receivables exposed to circular debt has increased from Rs304bn in June 2021 to Rs352bn in Dec 2021. Despite being affected by circular debt, OGDC still participated aggressively in the block auction held in January 2021. OGDC has participated in 11 blocks, out of which OGDC operates 10. This was the first major block auction after nearly 6-years.
Pakistan Petroleum Limited (PPL): We revised our earnings forecast by an average of 37% over FY22-24 after incorporating 1HFY22 results and higher oil price assumptions. PPL trade debts increased to Rs287bn in Dec 2021 (up 14% from Jun 2021) as the evolving circular debt is restricting growth prospects of the company. PPL is one of those E&P companies which got adversely impacted by the rising circular debt problem. Given the company’s cash position, PPL has only participated in one block in the last auction.
Mari Petroleum (MARI): We have revised up our MARI earnings forecast for FY22-24 average 27% on the back of upward revision in oil price assumption and incorporating 1HFY22 results. Conservatively, we have not included the impact of GTH project in our earning estimates as the timeline of the realization of production is still not certain. Net flow from this project is 150mmcfd of gas that is expected in three phases out of which 48mmcfd has already come online as per the company. However, the flows from Mari field still did not reflect this whole production outflow as per PPIS. MARI has remained insulated from the circular debt issue as the company mostly supplies gas to fertilizer plants where payment recovery is not a concern.
Pakistan Oilfields Limited (POL): We have revised our earnings forecast for POL by an average of 38% from FY22-24 after revision in oil price and 1HFY22 results.
Courtesy- Topline Securities