Pakistan Oilfields Limited (POL) has reportedly encountered significant flows in Pindori block at Pindori-10 well. Oil and Gas Development Company Limited (OGDC) and Pakistan Oilfields Limited (POL) own 50% and 35% stake, respectively.

The overall flow rate at different production parameters at fixed choke size is healthy (see side bar). The average output of oil at 832bpd and gas at 2.76mmcfd is expected to add onto POL’s and OGDC’s profitability. The operator also encountered water flows averaging at 330bpd.

We estimate the annualized earnings impact of PKR2.07/sh for POL (or 3.4% of FY20 earnings) and PKR0.20/sh (0.7% of FY20 earnings) for OGDC (based on assumed crude oil prices of USD60/bbl).

POL and OGDC currently trade at a P/E of 6.1x and 4.5x on FY20 earnings, respectively. (BMA Capital Management Ltd.).