Pakistan Petroleum Limited (PSX: PPL) is among the optimistic ones; amid the looming uncertainty that the E&P sector is facing regarding the amendment in the supplemental agreement and the implementation of windfall levy, PPL has chosen not to book the reversal of TAL block re-pricing issue like OGDC and unlike POL that did, which has not affected its earnings for 1HFY18.
The E&P giant announced its financial performance for 1HFY18 earlier this week and the company has announced 87 percent year-on-year increase in its bottom-line for the period. The earnings’ driver has been the top-line growth, which emanated from not only 16 percent year-on-year higher crude oil prices but also the re-piecing of Sui field. Despite the increase in royalty expense, which again came from higher revenue that included the additional revenue from Sui field’s gas wellhead prices, the gross margins of the company improved significantly.
A further boost to PPL’s bottom-line came from higher other income and lower exploration and prospecting expenditure during the first six months of FY18 versus those of FY17 as no fry wells were announced and also because of reversal of exploration expense in 1QFY18. However, the latest quarterly earnings (i.e. 2QFY18) were affected by higher exploration expense (up by 14 percent YoY), which the AKD Securities believe to have come from the settlement with Asia Resource Oil Limited (AROL) and the resultant revocation of AROL’s 10 percent working interest in Naushehro Feroz block.
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