POL - production woes continue

It does not settle well when oil and gas production by and exploration and production (E&P) company continues to go down. And unstiffening of production at Pakistan Oilfields Limited (POL) has kept a lid on the companys share price, which has disappointed the benchmark index over the last six months.
The countrys third largest E&P Company has been facing to rough times in production since the beginning of the fiscal year 2013. The chief reason behind production slippages has been subdued flows from POLs own operating fields.
Pakistan Oilfields Limiteds performance during 9MFY13 deviated from the sectors profitability formula during 1HFY13: a combination of higher oil production, and an eight percent year-on-year rupee depreciation versus the dollar.
Though some expectations of a rebound in oil production were making rounds, Nauman Khan of Topline Securities told BR that oil flows of POL slipped by four percent year-on-year; Gas production also continued its downward trend, contracting by 15 percent year-on-year.
The unattractive combination of lower volumetric flows and lower realised crude oil prices axed the companys top line by 2.5 percent year-on-year. Arab light crude oil prices hovered at $109 per barrel for the period, marginally down by two percent over similar period last year.
POLs profits for 9MFY13 declined by 7.6 percent year-on-year. Besides the slowdown in hydrocarbon production, noticeable increase in seismic costs and lower dividend income from associate companies (National Refinery and Attock Petroleum) affected the earnings adversely.
However, the company has realistic and strong volumetric growth expectations for the remaining for the coming fiscal year. The production commencement from four fields (Makori East, Manzlai, Mamikhel and Maramzai) and further development and appraisal plans will be sufficient to shore up companys earnings and share price.
Though chances are meager, increase in the international oil prices in future will further boost revenues.

=======================================================================

PAKISTAN OILFIELDS LIMITED (POL)

=======================================================================

Rs (mn)                 3QFY13   3QFY12    chg   9MFY13   9MFY12    chg

=======================================================================

Net sales                7,680    7,457     3%   21,424   21,979    -3%

Gross profit             4,405    4,581    -4%   12,353   13,549    -9%

Exploration cost           415      157   164%    1,134      289   292%

Administration expense      22       34   -35%       61       83   -26%

Finance cost               116       94    24%      492      357    38%

Other charges              281      330   -15%      847    1,025   -17%

Other operating income     355      486   -27%    1,718    2,046   -16%

Profit for the period    2,961    3,160    -6%    8,624    9,330    -8%

EPS (Rs/share)           12.52    13.36    -6%    36.46    39.44    -8%

Gross margin             57.4%    61.4%           57.7%    61.6%

Net margin               38.6%    42.4%           40.3%    42.4%

=======================================================================

Source: KSE Announcement