LAHORE - Pakistan Petroleum (PPL) is scheduled to announce its 1HFY12 result on Jan 25 (today). It is expected the company to post earnings of Rs19.9b (EPS of Rs15.18) in 1HFY12 compared to profits of Rs16.6b (EPS of Rs12.64) in the corresponding period last year, a growth of 20 percent YoY. Rise in 1) international oil prices, 2) wellhead gas prices and 3) production flows have all contributed towards the growth. In 2Q alone, we anticipate earnings of Rs7.65/share, up 14 percent YoY. The company is expected to announce a cash payout of Rs6-7/share along with the result. We maintain our ‘Buy’ call on the scrip.

Net sales for the company are expected to register an impressive growth of 22 percent YoY on the back of higher 1) international oil prices, 2) realized wellhead gas prices and 3) production flows. Arab Light crude oil prices averaged at $107/bbl in 1HFY12 vs. US$79/bbl in 1HFY11, up 35 percent YoY. Meanwhile, the company is expected to realize 17 percent YoY higher wellhead gas prices. On the production front, oil production increased by 5 percent YoY while gas production rose by 2 percent YoY during the period under review.

The company’s field expenditures are anticipated to rise by 9 percent YoY. However, a growth of 67 percent YoY in other operating income due to higher return on investments is expected to boost earnings growth for the company. Overall, earnings are likely to settle at Rs15.18/share in 1HFY12, up 20 percent YoY.