Pakistan Oilfields Limited (PSX: POL) came through as the only company of the Attock group, celebrating the 1HFY19 financial performance. While the higher crude oil price and depreciating currency stained the performance of the refining side of the group, the same factors lifted the E&P firm’s earnings for the latest quarter, and the first six months of FY19.
In 2QFY19, POL’s net revenue almost doubled, while the 1HFY19 depicted an increase of over 68 percent, year-on-year where around 25 percent higher crude oil prices pushed it up. Plus, the depreciating currency aided the lift. And these factors helped the company boost its gross profits despite higher operating costs and royalty expense.
And while no significant growth was witnessed in the production volumes, POL was also lucky to witness lower exploration expense – a major indicator of profitability for the E&P companies – as the company did not book any dry wells.
POL’s earnings after tax for 1HFY19 increased by over 65 percent, while the 2QFY19 profit after tax was up by a little over 80 percent, year-on-year. And another lucky factor for POL was the low base effect; According to AKD Securities, the year-on-year growth can also be attributed to the low-base arising from a Rs3.01 billion write down booked in 2QFY18 due to the absence of enhanced gas pricing (post conversion to Petroleum Policy 2012) for production from three Tal block fields (For details on the matter, read, “E&P sector’s policy issue”, published on February 12, 2018). POL also announced a dividend of Rs20 per share for the period.
While the second quarter of FY19 has been good for the E&P sector due to higher crude oil prices along with depreciating currency, the threat of a price fall cannot be ruled out; and the recent couple of months have shown that. Also, the E&P sector has been feeling the pinch from the FO curtailment with refineries restoring to lower utilisations.
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