December 08, 2020 (MLN): The local energy stocks are likely to gain some traction on two recent developments, both on international and local fronts.
On the international front, the UK today has begun delivering the Pfizer / Biotech Corona vaccine, which will be closely watched by oil markets amid hopes of normalization and early recovery in oil demand.
According to the recent research report by Sherman Securities, OPEC member countries expect oil prices to maintain current levels which may bode well for local E&P stocks especially Oil &Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL).
On the local front, the honorable Islamabad High Court (IHC) has dismissed the Cabinet Privatization Committee (CCoP) which may delay the allotment of shares to locally listed E&P firms, the report added. Thus, it is assumed that all the decisions taken after the formation of the CCoP under the chairmanship of Mr. Hafeez Sheikh will be nullified. The IHC, in a brief ruling on a petition, has stated that unelected advisers and special assistants to Prime Minister could not be a part of it.
To recall, the divestment of 7% government shares in the OGDCL and 10% in the PPL to ramp up non-tax revenues for addressing fiscal shortfalls were also on the CCoP agenda. The research believes this would further delay the process of divestment for a few months which may bode well for OGDC and PPL. Despite the attractive valuation, the stocks underperformed amid the fear of an additional supply of shares at the time when foreigners remained net sellers in both the stocks over the years.
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