FY19 has been outlined as a better year for the oil and gas exploration and production companies not only because of higher average oil prices, but also significant domestic currency devaluation. Both these factors have made it to the top drivers for earnings accretion for the E&P companies in FY19.
Pakistan Oilfields Limited has been the first E&P Company to announce its financial performance for FY19 that accompanied Rs30 per share dividend in addition of Rs20 per share interim dividend already paid. The company saw its top line grow by 25 percent, year-on-year, which came from around 14 percent year-on-year increase in international crude oil prices. Add to this the PKR/USD slide, the increase in realised oil prices was actually over 34 percent year-on-year in FY19.
On the other hand, volumetric sales remained tepid especially of crude oil with only slight increase in gas volumes. Gross margins improved by over 5 percentage points mainly due to comparatively controlled operating expenditure as well as amortization costs.
POL’s earnings for FY19 jumped by 48 percent, year-on-year; and apart from top line growth, lower exploration and prospecting costs and almost double the other income helped lift the company’s bottom line. The main factor behind lower exploration and prospecting was the absence of a dry well versus FY18, and also lower seismic acquisition. And other income increased due to currency devaluation. However, lower seismic activity points to lower productivity of the sector, which should pick up if volumetric sales are to be pushed up.