Analyst
Maryam Arshad
maryam.arshad@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA maintains Entity Ratings of Orient Petroleum Inc. (Pakistan Branch)
Rating Type | Entity | |
Current (22-Dec-21 ) |
Previous (22-Dec-20 ) |
|
Action | Maintain | Initial |
Long Term | A- | A- |
Short Term | A2 | A2 |
Outlook | Stable | Stable |
Rating Watch | - | - |
Orient Petroleum Inc. (Pakistan Branch) is engaged in upstream Oil and Gas business in Pakistan, it includes exploration, development and production of oil and natural gas reserves. Currently, OPI has six production leases which comprise of Ratana, Dhurnal, Bhangali, Sinjhoro, Mehar & Sofiya and seven exploration licenses namely Sakhi Sarwar, Marwat, Harani South, Saruna, Kohlu, Sinjhoro & Mehar. Orient Petroleum Inc. (OPI) is part of the group which includes Zaver Petroleum Corporation (Pvt) Limited (Zaver “ZPCL”) and Orient Petroleum Pty Ltd. (OPPL). The group is an established oil and gas business unit in Pakistan, with a portfolio of 9 Exploration Licenses and 8 Development and Production Leases. OPI’s reported segmental production of Crude Oil, Gas & LPG for Jul20-Jun21 is 130,282 BBL; 2,390 MMSCF and 6,038 MT respectively. OPI’s management is pursuing an expansion strategy as it aims to make additions to its revenue stream, to support the bottom-line profit. OPI reported topline of PKR 1.3bln for 1HCY21 (CY20: PKR 2.4; CY19: PKR 3.0bln) and the Company recovered from its losses to report profit of PKR 81mln for 1HCY21 (CY20: PKR 679mln; CY19: PKR (35mln)) owing to increase in production and crude oil prices. OPI managed to acquire leases on three operated fields including North Potwar, Soan & Ratana and three non-operated leases including Sofiya, Mehar & Sinjhoro. The work program to enhance production volumes in the upcoming years will be supported through a mix of in-house financing and debt. The strength of the entity lies in risk-adjusted recoverable reserves both from its production and development assets and exploration assets. With the increased volume, the profitability will improve as the synergies and efficiencies will take effect. These healthier cash flows will provide further support to the leveraged balance sheet, hence supplementing the company’s ability to meet its obligations. The financial discipline has been good and would be pivotal to future fiscal management.
The ratings are dependent on the sustained relative positioning of the company in the oil & gas industry. Volatility in topline and profitability remains key areas for considerations. Financial discipline is considered core to the ratings, with enduring emphasis on maintaining relevant coverages.
About
the Entity
Orient Petroleum Inc. is incorporated in Cayman Islands with limited liability and is operating in Pakistan through its Pakistan branch office. Occidental of Pakistan Inc. a USA-based company has been functioning in Pakistan since 1979. In 1995 it was acquired by Hashoo group and was renamed to Orient Petroleum Inc (OPI). Ultimate beneficial ownership lies with Mr. Sadruddin Hashwani, a renowned Pakistani businessman.
The Board of Directors of OPI comprises four members. They are supported by Technical Advisory Committee, consisting of well-established names in the industry. The management team is headed by Mr. Kamran Ahmed as Chief Executive Officer who has over 30 years of experience in investment banking, oil & gas upstream and downstream industry including working with Shell Pakistan and the Islamic Investment Bank Ltd. He is assisted by competent team of industry professionals.