PPL 9MFY17: up on prices

From E&P firms to the downstream players, oil and gas sector has witnessed an up tick in earnings this latest quarter; this has predominantly been due to improved crude oil prices. In the E&P sector, the earning growth has come from around 77 percent higher average oil prices (from $30/bbl in 3QFY16 to $53/bbl in 3QFY17), and higher production flows as well.

Pakistan Petroleum Limited (PSX: PPL), one of the largest E&P firms in the country has also been facing the low oil price pressure on its earnings; its latest annual financial performance (for FY16) was bogged down by lower oil prices - like other players in the sector. However, FY17 has been better, and the E&P witnessed a rise of seven percent and 31 percent year-on-year in its revenues for 9MFY17 and 3QFY17, respectively, which came from a mix of higher crude oil and gas wellhead prices, and higher hydrocarbon production flows.

The firm’s earnings for the nine-month period were up by 21 percent, year-on-year, while the 3QFY17 earnings jumped by 87 percent. Besides the revenue growth, what supported the bottom-line were flattish field expenditure and lower operating expense, the effects of which can be seen in margin improvement.

Rebound on oil prices has been the much needed boost to the bottom-line, and it was expected to be seen from the 2HFY17.

Apart from better pricing scenario, PPL has a few other goodies in its bag to benefit from, going forward. Revision of Sui’s pricing formula is one of them, which will likely to raise gas wellhead price in FY18.

The firm has been an aggressive exploration and drilling company; its latest find has been new gas reserves in district Matiari, in southern province Sindh.