The management of Pakistan Petroleum Limited (PPL) held a Corporate Briefing session on 22-Nov-21 to discuss the FY21 financial result and future outlook

Key Highlights

· To recall, the company posted a Profit after Tax (PAT) of PKR 52,431mn (EPS: PKR 19.27) in FY21 against PKR 50,256mn (EPS: PKR 18.47) in FY20, up by 4% YoY. The earnings grew amid i) 3% YoY higher oil prices, ii) lower exploration expenses given fall in the cost of dry wells, and iii) decline in operating expenses owed to lower production.

· The company informed that it produces 17% and 22% of local oil and gas production, respectively, with a portfolio of 22 producing fields (9 operated and 13 partner-operated) and 44 exploratory blocks (26 operated and 18 partnered operated).

· During FY21, the company spud three exploratory and three development wells. For FY22, the company plans to dig five exploratory and nine development wells. Furthermore, the company intends to appraise Naushahro Feroz, Hadi and Hub.

· The company completed GPF 4 Phase II and Benari Pipeline in FY21. Moreover, the company plans to connect more fields to GPF 4.

· The company’s production during FY21 dropped by 2% YoY, arriving at 852 mmcfd equivalent against 870 mmcfd equivalent owed to a significant drop in output of Kandhkot due to lower offtake from GENCO. To counter the revenue loss, the company plans to deallocate Kandkhot’s gas from WAPDA and allocate it to other sectors. Moreover, if the company can set up its power plant, then gas could be re-allocated to this. If this does not materialize, the company will consider processing the gas, removing carbon dioxide and other gases to be easily transmitted to SSGC and SNGP. Moreover, Sui Field witnessed a drop of 3% YoY due to natural decline, and the company plans to revamp the Sui field through compression.

· The company has farmed-in 1 (Shakar Ganj) and farmed-out two blocks (Punjab and Musakhel) during FY21.

· The company has been awarded Suleiman Block, in which the company has 50% working interest as a joint venture partner.

· Regarding Zafir Project, the company informed that it has litigation issues that are expected to be resolved soon. Once the issue is resolved, the company expects this to come online after ten months. The company estimates Zafir Project can add up to 60 mmcfd of gas.

· The depleting natural reserves is a serious issue for which the company is looking forward to participating in local and international biddings. The company believes that since 2012 there has not been any high potential bidding. Moreover, the company believes that government should hold onshore/offshore bidding in a few months with much-improved incentives so that local, international E&Ps are also interested in the bidding.

· Regarding circular debt the company told that government is considering various options for payment. Furthermore, the company told that during FY21 the rate of growth in circular debt has slowed down and collections have improved (PKR 160bn recovered).

· The company told that Dhok Sultan’s oil handling facility is reaching completion and is expected to come online towards the end of Nov’21 or first week of Dec’21. The company expects Dhok Sultan production to be 3,000 bopd and 500 mmcfd.

· Upon a question about exploration plans for Pakistan International Oil Limited (PIOL) the company informed that as operator it plans to drill 5 exploratory and 7 development wells in 1QFY23.

· The company informed that production from Mamikhel South is expected to commence in 2-3 months, subject to resolution of few issues.

Courtesy – AHL Research