LAHORE  - The week began on a bearish note as PTCL lower than expected earnings, heightened political uncertainty and weak law & order ahead of the upcoming elections weighed down on investors’ sentiments.

The KSE-100 index shed 352 points (1.9 per cent) in the first two trading days of the week. However, attractive valuations lured investors back to the market which resulted in a quick recovery. Overall, the KSE-100 Index declined by 0.4 per centWoW to 18,631 level, while average trading volumes improved to 164 million shares, up 15 per cent WoW. Key news highlights during the week were appointment of Dr. Shahid Amjad Chaudhry (Rector of Lahore School of Economics) as Advisor Finance and in charge of the Ministry of Finance and C/A registering a deficit of US$513 million in March-2013. Key financial results announced this week are as below:

Furqan Ayub, and expert, said that amid volatility in global equity markets and commodity prices local bourse also witnessed a volatile week. Market traded in a range of 269 points to close down by 0.4 per cent while volumes saw an increase of 31 per cent to verage Rs.6.2bn. Foreigner fund managers also remained net buyer of US$8.8(Till 18th Apr). Most of the companies announced their March quarter results this week like Attock Group, PTC, DGKC, HBL, EFOODS. PTC saw selling pressure after below expectation result announcement while DGKC and Efoods March earnings also fell below investors expectations. Renewed buying interest in OGDC, NBP, Engro Corp was also seen.

Samar Iqbal, another expert, said that results announcements, upcoming elections and change in global economic scenario will set investors’ mood. According to experts, amongst the major listed companies, all showed considerable improvement in their oil production during 3Q versus preceding quarters. OGDC (Pakistan’s largest oil and gas explorer) production was up 3 per cent from previous quarter while its gas production was up by 6 per cent. PPL and POL depicted improvement of 7 per cent and 14 per cent in their oil production during 3Q as against 2QFY13. However, their gas production is down 3 per cent and 8 per cent, respectively in 3Q as compared to 2QFY13.

Nauman Khan, an expert, said that country’s oil production surge to average 80.1k bpd (barrels per day) in 3QFY13, depicting an increase of 7 per cent from preceding quarter and 12 per cent from 3QFY12. Average gas production stood at 4.2bcfd (billion cubic feet per day) during 3Q which is up 5 per cent from 2QFY13. However, gas flows are down by an average 5 per cent from same quarter last year. Overall, improved production along with stable crude oil prices is likely to manifest itself in better 3Q earnings for three major E&P companies (OGDC, PPL and POL).

Experts maintain Over-weight stance on the sector with Pakistan Petroleum (PPL) as our preferred play. However, they also maintain Buy on Oil and Gas Development (OGDC) and Pakistan Oilfields (POL) as well.

Improved production from Nashpa and Makori east fields along with commissioning of Sinjhoro fields were the major propeller of oil production in 3Q as compared to previous quarters. While higher production from Zamazam, Mari, Uch, Kandhkot and KPD-TAY helped maintained gas plateau, given aging effect of Sui and Qadirpur field. Sui and Qadirpur production decline by an average 2 per cent in 3Q versus preceding quarter while are down significantly (8-10 per cent) from same quarter last year.

Overall in 9MFY13, country’s oil production surged by 9 per cent to 74.9k bpd while gas production is down 2 per cent to 4.2bcfd from same period last year.

In the absence of any major dry well, stable crude oil prices and average 1.7 per cent PKR depreciation against US dollar in 3Q as against 2Q higher production is likely to yield positive results for these companies. We expect listed companies earning to grow in the range of 15-20 per cent in 3Q from the preceding quarter.