Pakistan Petroleum Ltd (PPL) reported consistent cuts in its dividend payouts as
witnessed by market since FY08. The company had announced a dividend payout of
Rs12/sh in FY11 as against a payout of Rs9/sh and Rs13/sh in FY10 and FY09 respectively.
Years FY11 FY10 FY9 FY8 FY7 FY6 FY5
Div. % 120 90 130 155 110 90 55
Bonus % 10 20 20 10 10 ‐ ‐
Source: www.scstrade.com
Due to the concerns of circular debt coupled with the consistent flat growth observed in
Oil and Gas Sector, analysts did not expected much from PPL. The recent news updates
delineated apparent management’s intentions to discontinue dividend cuts. Thus
management is trying not to deprive its shareholders from dividend especially when
Government of Pakistan is the major shareholder and beneficiary.
PPL despite of undertaking large‐scale exploration and production activities together
with the strategic shift of focus to drilling its own oil and gas wells instead of relying on
joint venture partners to shore up the company’s depleting reserves; it is yet seems to
have its financial and liquidity position in a comfortable zone. This financial stability could
be a good omen and a trigger for the attractive cash payouts along with the customary
bonus of 10% ‐ 20%.
The biggest trigger in PPL is any news which is related to privatization since company
needs injection of investment in technology and latest equipments which could only be
possible if some able foreign partner take a direct control of the company. PPL, for many
years, is having flat gas production and its proportion of oil production is minimal in
overall ‘production mix’. At present the PPL has got weak triggers. The main trigger for
PPL is ‘price increase’ announced by the regulator OGRA on PPL’s depleting assets.
Rumors on Qadirpur subsided
We have had a discussion with many people in the company (OGDC) wherein we could
not find any thing negative happening at big gas producing field Qadirpur since it is
a perforated land in Sindh province and cannot be in any way equated with Pindori like
water log problem at Khyber Pakhtoonkhwa.
In fact a new compression plant installed is at the testing stage. The gas field reported
satisfactory sale of 501mmcfd till 6' o clock morning yesterday (which is last sale
reporting time). Any good result in testing would result in addition to gas production.
We consider this to be good news for OGDC (major stakeholder) and PPL (minor
holdings).
Showing posts with label OIL AND GAS. Show all posts
Showing posts with label OIL AND GAS. Show all posts
Tuesday, September 27, 2011
PSO EARNING FUTURE OUTLOOK
Break down in supply chain, fuel shortages and nationwide loading shedding
are becoming major sources of concern as PSO receivables reach a daunting
Rs155bn of which, around Rs131bn is the circular debt.
It appears that this famous bubble of circular debt is on the verge of bursting. It
has reached its limit and is creating enormous amount of problems for Pakistan
State Oil as well as for other refineries. It has hurt PSO’s liquidity massively
causing it to default on local refineries payments in this month, as a result of
Rs131bn to PSO by the power sector. In fact the companies have continuously
defaulted on its payment obligations hence hampering PSO’s ability to meet its
creditors’ payments.
This delay in payments to refineries has, in turn, affected local production
which is a sign that if not taken drastic measures immediately, our country
would suffer severe shortage of fuel causing prices of petroleum products to
reach sky high.
Moreover, the deteriorating liquidity of PSO is making it difficult for it to meet
its international obligations, for which the company is struggling very
assiduously as any default on this end would disturb supplies which would then
take months to resume, thus creating a gap in imports as well.
Hence, it is a dire need for the company to receive its payments as any further
delays in the near future would cause fuel cargoes to be deferred, as PSO has
utilized all its resources for financing future product supplies. As far as the local
production of fuel oil is concerned, it is already in melancholy and imports are
needed to curb the supply shortages to avoid increased load shedding.
In a nutshell, PSO needs to receive its rightful share of cash in the nearest
future to avoid further hindrances in local production and import of fuel oil, to
evade the severe scarcity of the concerned product, rising prices and intense
load shedding; before it gets bankrupt.
We have a ‘Sell’ stance on PSO with FY12 expected EPS in the range of
Rs57/sh‐Rs60/sh.
are becoming major sources of concern as PSO receivables reach a daunting
Rs155bn of which, around Rs131bn is the circular debt.
It appears that this famous bubble of circular debt is on the verge of bursting. It
has reached its limit and is creating enormous amount of problems for Pakistan
State Oil as well as for other refineries. It has hurt PSO’s liquidity massively
causing it to default on local refineries payments in this month, as a result of
Rs131bn to PSO by the power sector. In fact the companies have continuously
defaulted on its payment obligations hence hampering PSO’s ability to meet its
creditors’ payments.
This delay in payments to refineries has, in turn, affected local production
which is a sign that if not taken drastic measures immediately, our country
would suffer severe shortage of fuel causing prices of petroleum products to
reach sky high.
Moreover, the deteriorating liquidity of PSO is making it difficult for it to meet
its international obligations, for which the company is struggling very
assiduously as any default on this end would disturb supplies which would then
take months to resume, thus creating a gap in imports as well.
Hence, it is a dire need for the company to receive its payments as any further
delays in the near future would cause fuel cargoes to be deferred, as PSO has
utilized all its resources for financing future product supplies. As far as the local
production of fuel oil is concerned, it is already in melancholy and imports are
needed to curb the supply shortages to avoid increased load shedding.
In a nutshell, PSO needs to receive its rightful share of cash in the nearest
future to avoid further hindrances in local production and import of fuel oil, to
evade the severe scarcity of the concerned product, rising prices and intense
load shedding; before it gets bankrupt.
We have a ‘Sell’ stance on PSO with FY12 expected EPS in the range of
Rs57/sh‐Rs60/sh.
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