Pakistan Petroleum Limited (PSX: PPL) held its Annual General Meeting yesterday where the shareholders approved 35 percent cash dividend for FY16. The oil and gas exploration and production company also announced its financial performance for 1QFY17 yesterday, which was slightly lower on a year-on-year basis.
The E&P sector has been bitten by low crude oil prices; the trend in lower earnings for the sector has continued after the oil price crash. PPLs earning for the first quarter continued to be impacted by lower crude oil prices. For FY16, the firm saw a decline in its topline by 24 percent, year-on-year, which came basically from 44 percent year-on-year plunge in average oil price (i.e. from $73 in FY15 to $41 in FY16). In 1QFY17, the revenues were down by nine percent year-on-year due albeit an increase in output - again due to 13 percent year-on-year lower oil prices. Volumetric growth came from improved flows from Sui and Tal Block.
PPL has been an aggressive exploration and production firm; and it has continued its fervor in FY16 as well. In FY16, the company achieved a string of historic records including the drilling of 23 wells in record time, with 6 discoveries in operated and 4 in partner-operated blocks. In addition, 126 percent reserve replacement ratio was reached as well as completion of the first-ever international 3D seismic acquisition in Block 8, Iraq was made. However, field expenditure was down by 20 percent year-on-year due to lower exploratory expenditure in 1QFY17. Earnings for the quarter were down by three percent year-on-year, but there was a 190-basis point improvement in net margin.
What is of key importance here is that PPL has been able to reverse the declining production trend (volumes), and the decline in topline is only due lower oil prices.
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