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Wednesday, January 27th, 2021

Morning Briefing for Jan 26, 2012 – Standard Capital

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by January 26, 2012 Brokerage

Karachi: Pakistan’s oil and gas picture + valuation tables – situation analysis

According to Standard Capital,


NamePrice  P/E  ExpP/E sectorExpPE  Exp PE KSE30 ExpPEKSE100
Mari Gas93.364.
Attock Refinery122.374.
Pakistan State Oil252.483.
Pak Petroleum Ltd178.
National Refinery242.913.
Pakistan Oilfields365.378.
Attock Petroleum433.
Burshane LPG21.589.
Oil and Gas Dev.Co.149.6610.
Shell Pakistan2018.
Pakistan Refinery67.1910.724.
BYCO Petroleum7.21-1.8N/A4.56.67.7


Pakistani upstream oil ^ gas sector can better be described as unchartered or under-explored. The overall oil and gas exploration growth remains flat and does not meet local demand. In fact oil production does not present any exciting future growth prospect since pace of development work is slow given variety of reasons. Pakistani daily oil production for instance is little less than 1/3rd of total requirement.

This woeful performance is not reflected at the exchange where majority of underperforming companies continue to pose as ‘good earnings stocks’ given government backed pricing incentives or rebate structure. For argument sake, these exploration companies remain “underperformers” as against regional peers due to not so exciting exploration activities.

In Standard Capital’s list of not so exciting leading PE sheet, Standard Capital finds Mari Gas, a limited scale and low caloric gas provider, to be the most undervalued and attractive stock with a low PE of 2.6x given realization of its new find at Karak District. MARI mainly supplies uninterrupted + dedicated feed stock gas to fertilizer players such as Fauji Fertilizer, Engro Corp. old plant and Fatima Fertilizer. Other than MARI, Pakistan Petroleum {PPL} is a big disappointment due to historic failures in off‐shore ventures, depletion in Sui and slow pace work at other structures. PPL is only a privatization play since 2006. The company takes heart from government backed price increases normally twice a year.

Pakistan’s downstream players mainly thrive on bureaucrats made government incentives such as import price formula and fixed return formula that have been rendered faulty after year 2006 when global oil prices started showing increasing trend. These formulas worked when prices used to gradually go up and down in early 2000 but bitterly failed once prices skyrocketed from 2007. Hence downstream companies show volatile performance based on market risks and companies such as Pakistan State Oil {PSO} is now actually facing problems due to price differential issues.


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