The long awaited Pakistan Oilfield result announced on Thursday gave enough reason for its shareholder to cheer as the company announced dividend of Rs 18/share beating all the odds by a sizeable margin. The profitability, however, was badly hit by lower production levels throughout the year and due to the base effect of a onetime capital gain last year.
The firms net earnings declined by 35 percent posting an EPS of Rs 23.75, which was largely in line with consensus estimates. The firms top line was the worst affected by decline in international prices among the peers taking a slide of 16 percent due to 25 percent decline in oil prices averaging $68/bbl for FY09.
Average gas prices, however, acted as a saving grace for the top line as they increased by 36 percent averaging at Rs 270/mcf. The weakening value of rupee against US dollar also kept the top-line from deteriorating further as net selling price increased by 4 percent.
Oil prices were not the sole reason for declining revenue as dwindling volumetric production also played its part. POLs oil production remained 27 percent lower on year-on-year basis to record at 3.7kbpd. The problem mainly stemmed from subdued contribution from its biggest oil field Pindori, where the water-cut problem led to a massive 73 percent decline in production. POL failed to arrest the continuous decline in Pindori production, which peaked at 9.9 kbpd in 2006 - averaging only 812 bpd during FY09. The firms second largest field Pariwali also saw production decline by 23 percent during the period.
Unlike its peers the firms gas production also kept falling - mainly due to Pindori and Pariwali issues - as average production fell by 14 percent lower to 38 mmcfd. For a good part of FY09, the firm faced the curse of circular debt that forced it to arrange short term financing to meet its working capital requirements, which led to higher financial charges mainly in the first half of the year.
Prior year base effect of Rs 1.5 billion stemming from the capital gain on sales of APL shares also had its say in making the bottom line look worse than it actually was. The firm made a commendable progress on account of other income primarily due to interest earnings on cash deposits and exchange gains.
Going forward, POLs production woes seem to be coming to an end as recent production data shows considerable recovery in its worst hit Pindori field. The fields production averaged 1900 bpd during 1QFY10 after averaging a miserable 235 bpd in 4QFY09, showing clear signs of recovery. The firm expects production volumes to improve in the latter half of the year as drilling work is currently in process.
POL is likely to get further impetus from the upcoming production in five fields of Manzalai expected to commence between October and December 2009. Furthermore, the firm has four exploratory wells under drilling process - all in areas of strong prospects, which could act as a catalyst to POLs production in the latter half of the year. With a strong balance sheet, resolved circular debt issue and healthy growth prospects, the firm seems poised to outplay its peers.
=====================================================
POL P&L
=====================================================
RS (MN) FY09 FY08 % CHG
=====================================================
Sales 14,047 16,739 -16%
Cost of sales 5,754 6,156 -7%
Gross profit 8,292 10,583 -22%
Gross margins % 1 1 -7%
Finance cost 512 389 32%
Other income 2,042 1,392 47%
Gain on sales of shares - 1,558 -100%
PAT 5,618 8,616 -35%
EPS (Rs) 23.75 36.43 -35%
DPS (Rs) 18.00 13.00 38%
=====================================================
Source: company results
Comments
Comments are closed for this article.