Karachi, June 22, 2023 (PPI-OT): PSO: 9MFY23 Analyst Briefing Takeaways
Pakistan State Oil Ltd (PSO) held its analyst briefing earlier today, wherein the management discussed the following:
Company has 3,500 retail outlets across the country, with a cumulative storage capacity of 1,140k MTs (19 depots). Company also owns two lubricant manufacturing plants, capable of blending/producing 70k MTs annually. Company rehabilitated 76k tons of storage and added 32 new retail outlets during FY23.
With regards to the RFO sales being criminally low during past three months (compared to industry), management claims that Govt. is highly reluctant on purchasing power from fuel oil generators. Since PSO’s majority of RFO sales are towards the power sector, leading to volume shrinkage.
Total white oil volumes (down 19.6%YoY during 9MFY23) have shrunk significantly during the fiscal year, although PSO’s portion of the pie has increased, resulting in market share in the segment to end at 51.1% (vs. 48.2% in SPLY).
With regards to foreign exchange borrowings, interest on these loans are lower compared to the conventional rates. Gov’t takes cares of the FX differential’s which normally arises when the PKR depreciates sharply during a short period, hence the exchange loss risk towards PSO remains minimal.
Management stated that CAPEX for one storage terminal per MT stands at PkR30k. However, the company realizes economies of scale if the size of the terminal is larger.
Regarding the issue of the gas circular debt, there is currently no effective mechanism in place to recuperate the price differential when the Gov’t diverts RLNG towards the domestic sector. For this reason, RLNG receivables are expected to remain elevated in the near term.
Management commented that PRL’s field study is in advance stages, and the capex is estimated to be between US$1.2-1.7bn. The investment will not only upgrade the refinery facility but also double the production capacity.
With regards to windfall tax introduced in Federal Budget’24, management claims there is no clarity on its implementation yet.