Pakistan Petroleum Limited (PPL) at Glance

Scrip gained 5% in April 2010
Since the start of current month Pakistan Petroleum Limited (PPL) scrip has gained 5% or PKR 9.31 increase in its price from PKR 195.42 per share to PKR 204.73 till April 07, 2010 mainly at the back of the attractive valuation coupled with upcoming triggers including recent production expansions in support of the increase in wellhead gas prices.
PPL attracting foreigners
The aggressive foreign buying in oil and gas sector of the country precisely in OGDC for quite a long period is now triggering the foreigners to park their investment in other companies where PPL owing a sizeable float in the market is also attracting them primarily based on attractive valuation bundled with expected positive developments.
Another discovery at Latif Block
The company has recently disclosed a finding at Latif Block which is under a Joint-Venture (JV) between the PPL, OMV and ENI owing an equally distributed stake i.e. 33.3%. The company didn’t quote any number regarding the incremental production however the current production of the block stands around 30mmcfd of gas.
70 drills down the roadThe company has aimed to drill 70 exploratory along with 80 development wells in the upcoming 5 years. Currently, the company has a trend to make 4 explorations on average if examine the last 3 years’ trend which is creating a greater hope for the company to easily achieve the set targets. Moreover, the new production flows from at least 2 fields are expected to commence during the current quarter that are expected to contribute 4,300bpd oil and 85mmcfd gas where further 2 are expected to contribute in beginning of later half of the same year. The further benefit is likely to come from the increase in wellhead gas prices especially from Sui and Kandhkot to improve by 20%.
Looking Forward
I maintain ‘buy’ stance for PPL scrip by considering its FY11E earnings at 6.59x where my target price for FY11 is PKR 230 per share.