Domestic joint venture partners: MOL's aggressive stance to yield positively

MOL, an integrated oil and gas group in Hungary, has indicated towards an aggressive stance for their exploration and development programme in Pakistan. MOL's aggressive stance would also yield positively on its domestic joint venture (JV) partners, particularly Pakistan Oilfields Limited (POL).
"In its 'Investor Presentation March 2011' the presented production if materialises could translate into earning up-tick of an average 18 percent from our base-case POL's FY12-15 earning forecast", Nauman Khan, an analyst at Topline Securities said. "Furthermore, by looking at the few big and mid size discoveries in last few years by MOL, we believe the company could materialise its aggressive policy specially when oil prices are expected to remain firm at least in short to medium term due to unrest in Middle East, boding well for POL", he added.
The investor's presentation reiterate MOL's conviction in its hydrocarbon reserves in Pakistan, including Tal, Karak and Margala block in its key projects. The presentation highlights key features of working programme in Pakistan, includes acquisition of 279km 2D seismic, construction of necessary surface facilities and pipeline for EWT of Makori-East 1 well, continuation of early production of Mamikhel-1 and Maramazai-1, drilling of 2 appraisal well in Tal block and 4 exploration well (1: Tal, 2: Margala and Margala North and 1: Karak), drilling new production well Manzalai-9 and implementing of tie-in facilities and additional components related to central processing facility, award of EPCC (Engineering, Procurement, Construction and Commissioning) contract of Markori 150mmcfd CPF and drilling 2 development wells and 2 production wells in 2012-13.
Furthermore, company has highlighted a production boost from 4,700boepd (barrels of oil equivalent per day) in 2010 to 23,000boepd by 2016, depicting a 6-year CAGR of 30 percent, which is far above our base-case assumption of 6-year production CAGR of 21 percent.
Impact on POL's earnings based on MOL estimates "Based on MOL's six discoveries (all in Tal block) in Pakistan, we believe the projected production enhancement to come primarily from Tal block as other blocks have yet to deliver discoveries", he said. "Aligning the production assumption with that of company's projection will translate into an up-tick of our earning projection for POL by an average 18 percent for FY11-15, with a potential to push our TP from Rs 400 per share to Rs 482 per share, up 17 percent", he added.