KARACHI, Aug 28: On Thursday, when the company announced much-awaited date of the board meeting: September 15, the price of the share in Pakistan Oilfields Limited (POL) took a massive jump of 7 per cent to close at Rs336 from the overnight level of Rs313. The stock has commanded a great deal of investors’ respect and in the eight months this year, the price of the company’s share has witnessed meteoric rise of 96 per cent, from Rs171 on January 3. The scrip has quite comprehensively outperformed the market index, which has risen 61 per cent so far this year.

POL is the only publicly quoted oil and gas exploration company. Several sector analysts hold bright prospective view on the company, due to new discoveries that are expected to keep earnings flowing.

Analysts, traders and speculators are throwing around the net profit figures and possible payouts that the Board would announce when it sits to approve the accounts and dividend on September 15. Most estimates of after tax profit for the year ended June 30, 2003 range between Rs2.6 and Rs2.8 billion. The company has already paid interim cash dividend at Rs10 per share; expected final payout is Rs12, which on the current market price would offer a 6.5 per cent dividend yield, while the stock is trading at price-to-earnings (p/e) ratio of under 10 per cent.

Recently, new oil and gas reserves have been found at POL’s own operated Pindori development and production field located near Islamabad (as on June 2002, POL held a 35 per cent working interest in the field). Due to the additional discovery, production of oil from Pindori field would increase by 2,000 barrels per day (bpd) to 6,200 bpd. The production of gas was expected to increase by 7mmcf from 19 mmcf/day to 26 mmcf/day. Says analyst Abdul Rasheed at InvestCap: “The discovery is quite significant for POL as it would increase company’s oil and gas production by 13 and 7 per cent, respectively”. The field has remaining oil reserves of 20 million barrels and gas reserves of 187 bcf. The Pindori field is said to currently contribute 42 per cent of the company’s oil production and 18 per cent of its gas output. The discovery at Pindori follows on the heels of a huge gas discovery in Tal Block in NWFP. Waleed Qadri, energy sector analyst at brokerage, Jahangir Siddiqui & Co.Ltd. observed that POL’s Liquefied Petroleum Gas (LPG) segment had witnessed considerable growth in recent years with its share in revenues increasing from 17 to 24 per cent during financial year 2002.

For the first nine months July-March 2002-03, POL had posted 30 per cent increase in net earnings amounting to Rs2,060 million, compared to Rs1,589 million in the corresponding period of the previous year. Analysts at JSCL said that profit had improved on the back of 12 per cent increase in net sales, considerable decrease of 96 per cent in well workover expenses and 33 per cent growth in “other income”. Sales were stated to have improved due to 20 per cent and 6 per cent respective increase in crude oil and LPG volumes amidst increase in selling prices. “Other income” had soared because of around 10 times increase in rental income along with lower exchange loss during the period.

The price of locally explored crude oil is linked with global oil prices, according to the Exploration Policy. The gas production from Pindori fields would also indirectly be linked with international crude oil prices. The global oil prices in the outgoing fiscal year 2002-03 had remained significantly higher owing to the Middle East war and limited oil supply from Venezuela. Oil sector companies in Pakistan were expected to perform better in financial year 2003.

An advantage that POL enjoyed was the low financial costs since on-going exploration activities have been financed through internal funding. The company’s routine exploration activities marked a substantial increase with Rs330 million exploration costs being expensed and Rs1,263 million capitalized during financial year 2002. Despite huge exploration and development costs, the company’s debt to equity ratio has continued to remain marginal.