POL: EPS likely at Rs 45.3, up 40pc in 2011

Pakistan Oilfields Limited (POL) is all set to announce its corporate result for year of 2011 on September 11, 2011. It is expected the company to post an earnings of Rs12.2 per share in fourth quarter of the year, translating into full year earnings of Rs45.3 per share. Furthermore, it is anticipate a final cash dividend of Rs22 per share to accompany the corporate result, rendering into full year payout of Rs32 per share.

Despite the uncertainty surrounding the international crude oil prices, the experts continue to maintain ‘BUY’ stance on the scrip which is offering a upcomming year 2012 dividend yield of 12 percent (base case assumption) and is trading in 2012 and 2013 PE of 6.6x and 5.3x, respectively.

On account of improved net realized hydrocarbon prices and improved volumetric production company’s topline is expected to post an impressive growth of 41 percent to stand at Rs25.2bn in year 0f 2011 as compared to Rs17.8bn last year. We estimate company’s net realized oil and gas prices to improve by 27 percent and 5 percent to respectively, while thanks to improved production from Tal block, company’s oil and gas production increased by 10 percent and 40 percent respectively.

In fourth quarter alone, we expect company’s topline to stand at Rs7.0bn, depicting a double digit improvement of 40 percent.

In addition to the growth in the topline further support to the bottomline likely to comes from

i) decline in company’s exploration cost by 24 percent to Rs1.2bn thanks to no dry well.

ii) 26 percent surge in company other income on account of higher payout of its associate companies and high interest rate environment.

Major risk to our earnings valuation comes from adverse movement in the international crude oil prices. Its worth mentioning here that international crude oil prices (Arab Light) continues to hover above our base case price assumption of $96 per barrel in next year, thus we are keeping our base case earning projection intact. On volume front, we expect augmented production from Tal and Iklas block to keep the investor interest in the scrip.