Oil and gas exploration mutes despite energy crisis

Business

Oil and gas exploration mutes despite energy crisis

Close

Pakistan's search for new hydrocarbon reservoirs continued to remain muted in 1HFY12.

05 January,2012 01:08 pm

According to a report, only 6 exploratory wells were spudded similar to that of last year. The main reason behind all this is said to be circular debt and challenged security situation particularly in KPK and Balochistan as it continue to bode ill on the sectors exploration program while some carry-over wells were also completed.During this period, E&P companies continue to focus on maximum utilization of their existing reservoirs, spudding 15 wells, a notch above 13 wells drilled in comparable period last year.Pakistan Oilfields (POL) and Oil & Gas Development (OGDC) during 1HFY12 drilled one exploratory well each while Pakistan Petroleum (PPL) has yet to spud for new reserves.In spite of sluggish E&D activities, the report maintains Over-weight stance on the sector on account of attractive valuation and its ability to optimize production from existing reservoirs. It recommend Buy on POL and PPL that are trading at FY12E PE of 6.2x and 5.7x, respectively., while OGDC is trading at PE of 7.5x.During 1HFY12, sector spudded a total of 22 E&D wells accomplishing only 29% of the full year target of 76 wells. In the same period last year, the sector drilled 23% of its target of 80 wells. The activity continue to be skewed towards development activities, with 15 development wells as against full year target of 45, while only 7 exploratory wells were drilled versus FY12 target of 31 wells.The listed sector has remained muted in their own operating lease with major dependency on their JV partners. POL spudded 1 exploratory well and no development well, while PPL was on the other end of spectrum, with company drilling 1 development well and no exploratory well. OGDC has recently started working on their 1st exploratory well of the year, while have spudded 6 development wells.