Pakistan Petroleum Limited (PPL) held its analyst briefing earlier today, discussing the following points. Regarding international operations, the block in Abu Dhabi has several known discoveries, and the company expects to spud the first well in the mid-next year.

· To recall, the company posted the highest quarterly PAT PkR26.6bn (EPS: PkR9.8) for 1QFY23, higher by 20.9x compared to the previous quarter.

· Company’s oil/gas production stood at 12,500BPD/808MMCFD in FY22, respectively. PPL contributes to 21%/17% of total domestic production of gas/oil, respectively. Gas production jumped significantly in 1QFY23 (848 MMCFD) due to better offtakes from Kandhkot, as offtakes from the field were hampered due to low purchases from GTPS Guddu—GENCO. Normalized gas offtakes for Kandhkot are expected to reach 180-190 MMCFD (current: 120MMCFD) following the installation of new compressors.

· Company was awarded four blocks (2 self-operated & 2 partner-operated) during FY22. Regarding international operations, the block in Abu Dhabi has several known discoveries, and the company expects to spud the first well in the mid-next year.

· Company has executed a framework agreement for participation in the Reko Diq project; PPL’s stake in the venture stands at 8.33%. However, the company denied that it would be paying against the GoP stake.

· Regarding ongoing work programs, the company drilled four exploration wells (3 partners operated, one self-owned). On the development front, 8 wells were drilled (6 partner-operated, two self-owned).

· Cash collection from the sale of gas (customers including SNGPL, SSGCL, GENCO etc.) stood at 47% during the year. Govt. and affected companies are formulating a ‘mitigation plan’ to reduce the pileup of gas receivables. Regarding the deteriorating liquidity position, the company has requested GoP to allow payment of royalties and sales tax on a receipt basis.

· Regarding the future outlook, the company expects gas production for FY23 to clock in at 800mmcfd. Near-term plans include drilling 7/9 exploration/development wells during the year alongside seismic campaigns of 2D/3D of 1800/1000 sq km.

· Regarding higher exploration expenses in the previous quarter, management commented that PPL is moving onto frontier exploration projects due to health prospects and maturing nature of other areas. Although high in potential, the said frontier ventures also entail significant risk, and the company plans to cast the venture aside if sustainability/feasibility remains unestablished in the coming 3-4 years.

· Regarding the Adhi water incursion issue, the company plans to address the water handling issue and begin drilling the well by next year. Normalized oil production from the well is 1,000bpd.

· CAPEX for FY23/FY24 is envisaged at PkR27bn/34bn, respectively.

Courtesy – AKD Research