The oil and gas exploration and production sector has benefited largely from the massive currency depreciation and the crude oil prices. And increased sales volumes and lower expenses make the best recipe for a celebration.
However, these two components were missing from the Pakistan Oilfields Limited’s (PSX: POL) earnings growth for the latest quarter (3QFY19), and the company announced only a marginal increase in earnings for 3QFY19. Overall, POL announced its financial performance for 9MFY19 last week with a hefty growth in earnings.
POL’s top-line grew by 50 percent in 9MFY19 and by 22 percent year-on-year in 3QFY19. While production volumes increased only slightly in the first half (1HFY19), the volumetric growth remained subdued in 3QFY19. Hence, the growth in revenues for the quarter rested largely on increase in crude oil prices and 25 percent Rupee depreciation versus the greenback.
POL’s earnings for 9MFY19 were up by 42 percent year-on-year, which largely came from the growth in earnings attained in the first two quarters of FY19.
Earnings for 3QFY19 were up by only 6 percent year-on-year, where the profits were cut short by higher amortization costs and significantly higher exploration and prospecting expenditure. Exploration costs increased four times in 3QFY19 versus 3QFY18 likely due to a dry well cost incurred during the period.
The overall profits for 9MFY19 were also higher due to the low base effect 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.
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