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SINGAPORE, Mar 22 (Reuters) Merrill Lynch said on Wednesday it is initiating its coverage of shares of Pakistan Oilfields Limited with a ''Buy'' rating, and set a 12-month target of 694 rupees ($11.55) for the stock. Pakistan Oilfields shares, which last traded at 589.95 rupees, are trading at a discount to regional peers and the company holds decent growth potential, the investment bank said in a research note.

''We forecast POL's oil production to rise by 16 percent over 2006-2008, while gas production is expected to double. We see potential upside coming from future possible discoveries, further exploration into currently producing fields, and potential diversification strategy,'' it said.

($1 = 60.10 rupees) REUTERS PR RN0956