KARACHI: Pakistan Oil and Gas Exploration (E&P) sector's profitability has declined by 40 percent on year-on-year basis during the fourth quarter of FY20, with full-year FY20 earnings dropping by 10 percent.
"The four listed companies (100 percent of the sector's market capitalization) earnings' have declined to Rs 36 billion during the fourth quarter, lowest in last 11 quarters on the back of decline in revenues by 28 percent and other income by 64 percent on YoY," an analyst at Topline Securities said.
The sector's revenues during the quarter declined due to 61 percent fall in average Arab Light oil price to $27/bbl compared to $69/bbl in the fourth quarter of FY19 and $54/bbl in the third quarter of FY20.
Similarly, Oil and Gas production of these companies fell in the range of 1-37 percent on YoY in the fourth quarter of FY20 due to COVID-19 outbreak as refineries production remained on the lower side, thus impacting E&Ps' offtake.
Exploration costs fell by 51 percent on YoY as exploratory activities of Pakistan Petroleum Limited (PPL) remained low due to the cash crunch the company is facing on pretext of gas sector circular debt.
During FY20, profitability of the sector went down by 11 percent to Rs 196 billion due to 3 percent YoY decline in revenues and 35 percent YoY decline in other income. Other income fell as PKR devalued by Rs 8 per US$ in FY20 as against Rs 39 in FY19. Amongst the companies, Oil and Gas Development Company (OGDC) posted a 52 percent YoY decline in earnings during the fourth quarter of FY20 due to fall in oil and gas production by 18 percent and 23 percent YoY, respectively. Other income of the company declined by 58 percent on YoY due to absence of heavy exchange gains. Pakistan Petroleum Limited (PPL) posted a 24 percent YoY decline in earnings, relatively lower than peers (POL and OGDC) as 92 percent YoY fall in exploration cost cushioned the drop in earnings. In line with peers, other income of the company fell by 69 percent on YoY due to absence of heavy FX gains.
Pakistan Oilfields Limited (POL) witnessed the largest decline in earnings to the tune of 57 percent YoY due higher concentration of its revenues towards oil. Oil and gas production during outgoing quarter fell by 27 percent YoY and 29 percent YoY, respectively.
Mari Petroleum (MARI) posted a 6 percent YoY decline in its earnings as decline in oil prices did not affect its gas pricing due to the 6-months lag formula being applied for well head gas price calculation. Gas production of the company also remained intact, witnessing a fall of just 1.0 percent YoY, while oil production fell by 5 percent YoY.
Copyright Business Recorder, 2020
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