Kandkhot revival to significantly uplift PPL’s profitability
NewzToday Report
Federal minister for energy directed PPL to formalize a plan to maximize production from Kandhkot gas field (100% owned by PPL).
The field has produced an average 107mmcfd of gas in FY26 against its peak production of 262mmcfd due to lower requirement from GENCO-II.
If the company can increase its production from this field to its peak flows by injecting it to the network through installation of Gas processing facility or revival of Guddu power plant, this will have an annualized impact of PkR4.3/sh or 10.6% on PPL’s FY27E profitability of PkR40.5, as per our estimates.
If Kandhkot gas wellhead pricing adjusts upward toward PP12 benchmark levels, similar to the Sui gas field’s pricing revision following the D&PL conversion in order to intensify further drilling and production, the resulting earnings impact for PPL would be much higher than our estimates. However, we have not incorporated impact of incremental flows in our estimates as we wait for final plan.
On the other side, this will provide foreign exchange saving of US$477mn/annum by replacing expensive RLNG flows (contractual ones) and of US$792mn/annum in comparison to current spot purchases. Moreover, these incremental flows would help to lower our national average price by PkR116/mmbtu or 6.8% from current tariffs approved for SNGP and SSGC.
Concurrently, ongoing resolution talks between the IMF and authorities regarding energy sector circular debt also serve as a major catalyst for the scrip.
We have a ‘BUY’ stance on PPL with a Dec’26 target price of PkR412/sh, alongside a DY of 7.4% during the same period. Our outlook is strengthened on the back of: i) higher future exploration prospects given improving liquidity situation, ii) 8.33% stake in highly prospective Reko Diq Mining Project, iii) offshore working interests in Abu Dhabi Block-5, along with consortium partners and iv) improvement in cash payouts.
