LAHORE - The much-awaited gas of 200 million cubic feet per day from Manzalai (Tal block) is likely to come online by Sept this year while another 45mmcfd additional gas from Mamikhel is also expected in December. Energy experts are of the view that the production of the 200mmcfd gas was earlier to commence in 4QFY09. At present, gas production from Tal block stands approximately at 52mmcfd. Experts believe that the expected gas flows from Tal block in the next three months is likely to mitigate dwindling oil price risk. They expect production additions from Tal block to contribute Rs5-5.6 per share to the earnings (18-20%) next year while the full impact would be realized in FY11. Average daily oil and gas production from Pindori is down 73% to 809bpd (FY08: 3.0ktons) and 72% to 2.5mmcfd (FY08: 8.9mmcfd), respectively while production from Pariwali also remained subdued at 1.5kbpd (down 23%YoY) and gas declined to 15.8mcfd (down 18%YoY). Experts believe, the downside risk in volumes is minimal given the fact that production has already bottomed out. Pindori, which was the largest oil producing field for the POL, saw its production decline by an average 37% during last 5 years. Currently the field is producing approx.330bpd while average production in FY09 stood at 809bpd, down 73%YoY. Though the reserve size of the field is 32.8mn barrels, - enough for more than 50 years, the consistent decline in oil production is a result of significant drop in well head flow pressure and higher water levels. However, work over job at Pindori-3 for water shut-off is still in progress which is expected to recover additional 500bpd of oil. Going forward, we have assumed 1000bpd from Pindori. Farhan Mehmood said that regionally, major E&P companies are trading at an average 16.4x, on that count POL seems cheapest. The stock is currently trading at an implied oil price of US$40 per barrel compared to oil price assumption of US$54 per barrel for FY10 and US$77 for FY12. Target price for the stock is Rs245 offering handsome 59% upside- it is recommended 'Buy at current levels. Risk to our thesis are 1) sharp decline in oil prices 2) delay in addional production from existing and new fields (Manzalai and Mamikhel) and 3) continuation of circular debt.