Pakistan Petroleum Limited is the pioneer of the natural gas industry in the country and has been a frontline player in the energy sector since the mid-1950s. PPL contributes over 20 percent of the country’s total natural gas supplies besides producing crude oil, Natural Gas Liquid and Liquefied Petroleum Gas.

Its history dates back to the establishment of a public limited company in 1950, with major shareholding by Burmah Oil Company (BOC) of the United Kingdom for exploration, prospecting, development and production of oil and natural gas resources. In 1997, BOC disinvested from the E&P sector worldwide and sold its equity in PPL to the Government of Pakistan. Later on, GoP reduced its holding through an IPO in 2004, which was further decreased with the initiation of the Benazir Employees Stock Option Scheme (BESOS) in 2009. The process of government divestment continued and it disinvested another 5 percent shares, in a secondary public offering in 2014.

At present, PPL’s shareholding is divided between the government, which owns about 68 percent, PPL Employees Empowerment Trust that has a little over 7 percent and private investors, who hold nearly 25 percent. Please refer to the chart for the breakup.

PPL’s investments include 100 percent shareholding of MND E&P Limited, a company incorporated in England and Wales. The name of the subsidiary has been changed to PPL Europe E&P Limited. It also has a subsidiary called PPL Asia E&P B.V. with corporate seat in Amsterdam, Kingdom of Netherlands, which focuses on exploration and production of oil and gas in the region.

The E&P giant operates 10 producing fields that include Sui, Kandhkot, Adhi, Mazarani, Chachar, Adam, Adam West, Shahdadpur, Shahdadpur East and Shahdadpur West and holds working interest in seventeen partner-operated producing fields. The company also has an operating interest in Bolan Mining Enterprise, which is a joint operation between the Government of Balochistan and the Company for extracting mineral resources in the province of Balochistan.

PPL and its subsidiaries hold a portfolio of 44 exploration blocks. 26 blocks are operated by PPL (including one in Iraq operated by PPLA) and 18 are operated by the company’s partners including three offshore blocks in Pakistan and two on-shore blocks in Yemen.

Financial performance FY17

After around three years of low oil prices, the country’s E&P sector took a sigh of relief as crude oil prices improved. Hence FY17 was a good year for the sector including as the company announced a whopping increase in its earnings for FY17, single handedly lead by revenue growth.

PPL’s revenue growth was at around 46 percent year-on-year in FY17, while the earnings increased by more than twice. Where increase in crude oil price made its contribution to boost the revenues, fortunately for PPL the improved performance stemmed from the natural gas volumes this time. PPL received gas price adjustment of Rs31.12 billion for 25 months starting June 2015 to June 2017, which boosted the top line along with improvement in natural gas output from its key fields: Sui and Kandot. Its overall production exceeded an average of 1 bcfd in FY17, registering a growth of around 8 percent year-on-year. Lower finance costs also helped the earnings of FY17.

In operational terms, PPL’s production, including that from joint operations with partners, averaged 902 mmcfd of gas, 16,299 barrels per day of oil, NGLs and condensate, and 223 metric tonnes of liquefied petroleum gas per day.

Exploration costs too remained on the lower side despite the firm’s aggressive drilling activity: According to the firm’s annual report, 28 development wells were drilled during the year, and out of these 15 were drilled in areas operated exclusively by the company, while 13 wells were drilled in areas operated by the company’s partners. PPL made 2 discoveries in its own operated blocks, while one in partner-operated block in FY17.

1QFY18 snapshot

1QFY18 was again painted by more than twice increase in profits, with a spike in margins. PPL’s revenues for the first three months of FY18 were a product of higher production figures, improved oil prices, and hence an upward revision of Sui’s wellhead gas price by around 80 percent to $2.66 per million BTU.

The firm also benefited from the one-off positive price variance due to revision in wellhead gas price of Tal field. Also, volumetric growth came from the combined effect of 5 percent, 17 percent, 18 percent and 90 percent increase in gas, oil, LPG & barytes sales volumes, respectively. PPL’s earnings were higher also because of a reversal of exploration expense. During the first quarter FY18, two wells (one exploratory and one development well) were spudded as compared to four wells.

Outlook

PPL has been improving margins, and has been working aggressively towards hydrocarbons drilling. The sector’s drivers seem back in action as the sector has planned a total of around100 new wells for FY18, where giants like PPL and OGDCL have ramped up their efforts in Balochistan and KPK fields that were previously untouched due to security threats.

PPL has also apprised in a recent announcement at the bourses that Asia Resource Oil Limited (AROL) has finally settled its civil case of outstanding dues/late payment surcharges on Gambit South, Naushahro Feroz and Kotri North Blocks and forfeited its 10 percent working interest in Naushahro Feroz in PPL’s favour. This will further boost the earnings in the coming quarters.

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PPL - Pattern of  Shareholding


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Categories of Shareholders                                     Percentage


Associated companies, undertakings and related parties               held


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PPL Employees Empowerment Trust                                     7.35%


PPL Employees Retirement Benefit Funds                              0.06%


NIT and ICP Banks, Development Financial Institutions,              0.07%


Non-Banking Financial Institutions                                  1.01%


Insurance Companies                                                 0.18%


Modarabas and Mutual Funds                                          2.36%


Shareholders holding 10% or more Government of Pakistan            67.51%


General Public Resident                                             4.52%


Non-Resident                                                        0.01%


Others Non-Resident Entities                                       11.61%


Public Sector Companies and Corporations                            3.46%


Joint Stock Companies                                               0.66%


Employee Trust / Foundations etc.                                   1.20%


Total                                                             100.00%


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