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There is only one difference in domestic oil and gas exploration and production sector today and four months ago - the crashing international crude oil prices - the effects of which can be seen in the latest financial performance of the E&P firms. Where production forecasts especially for crude oil were quite optimistic for FY15, revenues seem to be weighed down by sluggish oil prices.
In 1QFY15, overall sales of the main listed oil and gas firms that include OGDCL, PPL, and POL saw a growth of 11 percent year-on-year. All of this growth was volume-led where cumulative crude oil production increased by around eight percent year-on- year in 1QFY15 from fields like Tal and Nashpa. Natural gas production also posted a meager increase of around two percent year-on-year.
Apart from weak crude oil prices, the earnings of the sector were also stung by more than two-fold increase in exploration costs in 1QFY15. These were characterised by higher seismic activity and dry wells declared during the period. Earnings of the three E&P firms dipped by seven percent year-on-year in 1QFY15.
Starting FY15 on a subdued note, the E&P sector has underperformed the broader index, and not only the lack of any new discoveries, but OGDCL offer postponement has affected the stock prices. With bears howling over the crude oil market, oil prices are anticipated to continue to remain slothful, and so is crude oil production and hence profits in the near term.


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OGDC PPL POL Total
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Rs (mn) 1QFY15 YoY 1QFY15 YoY 1QFY15 YoY 1QFY15 YoY
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Revenues 64,396 3% 30,967 11% 9,845 11% 105,208 6%
Exploration 3,752 92% 2,683 414% 288 16% 6,723 147%
Net profit 28,310 -16% 13,688 10% 4,171 16% 46,169 -7%
Net margins 44.0% 44.2% 42.4% 43.9%
Exploration cost to sales 5.8% 8.7% 2.9% 6.4%
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Source: Company results at KSE

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