763 replies to this topic

[Mansoor1]

OMCs: Chevron's exit may benefit existing players

We contend Chevron's reported plans to exit Pakistan's downstream space will eventually benefit existing players as the govt. focuses on key issues faced by the industry in an effort to improve the operating environment.

Increase in the marketing margin remains a key demand even after last years' 30-35% upgrade, in our view. Our sensitivity analysis yield 3-7% upside to earnings of PSO and APL for every 10% increase in margin.

We believe the downstream industry will undergo a consolidation phase over the medium term despite pockets of growth opportunities across fuel oil segment.

Exit of Chevron and acquisition by an existing player is unlikely to have any implication on prices and margin as most fuel products are regulated.

While we do not rule out the possibility of new player entering the market, APL and Byco appear to be key contenders among existing players.

(KASB)

[Amin Khan]

OMC : Oil Sales Decline for 5th Consecutive Month

Oil consumption during the outgoing month declined by 12% YoY to 1.44mn tons led by falling demand of HSD

The trend was no different compared to the numbers of Mar12 as consumption witnessed a hefty decline of 10% MoM mainly driven by decline in HSD and MS sales

Oil sales during 10MFY12 declined by 3% on account of 1) rising circular debt which led oil marketing companies to shy away from FO sales, 2) higher product prices and 3) decline in sales to NATO forces

With high international oil prices lending its due share to unending circular debt catastrophe, we maintain our market weight stance on the oil marketing sector of Pakistan

With relative immunity towards cash strapping circular debt, greater share of high margins and cash stable products (Asphalt) and improving share of fixed margins products (HSD and MS), APL stands as our top pick in the oil marketing chain

(BMA)