Stable margins anchor POL’s 1HFY26

In 1HFY26, Pakistan Oilfields Limited (PSX: POL) delivered a resilient earnings performance despite a decline in the topline and a sharp decline in other income. Net sales for POL fell 9 percent year-on-year, primarily reflecting lower realized oil prices during the period.

Gross profit declined in line with revenue, down 9 percent year-on-year, with gross margins largely stable at around 65 percent, indicating cost discipline despite pricing pressures.

Operating costs were contained, declining 7 percent year-on-year, while royalty charges fell 8 percent, broadly tracking lower sales volumes and prices.

A notable feature of the half-year performance of POL was the normalization of exploration expenditure.

While 2QFY26 saw a spike in exploration activity, cumulative exploration costs for 1HFY26 declined 62 percent year-on-year, easing pressure on profitability at the half-year level.Exploration costs went from 28 percent of sales in 1HFY25 to 11 percent in 1HFY26.

Administrative expenses and other operating charges also posted double-digit declines, reflecting tighter cost controls.

However, other income fell sharply by 51 percent year-on-year due to the lower interest rate environment and reduced returns on cash balances, partially offsetting the benefit of lower exploration spending.

Despite these headwinds, profit before tax remained broadly flat year-on-year. A lower effective tax rate, which stood below last year’s level, supported bottom-line growth, resulting in profit after tax rising 16 percent year-on-year.

Net margins improved to above 42 percent, underscoring POL’s ability to preserve profitability even amid pricing and financial income pressures.

The company also maintained its strong payout profile, declaring an interim dividend of Rs27.50 per share for 2QFY26.

Overall, 1HFY26 reflects a transition phase for POL: revenue and financial income remain under pressure from external factors, but cost management, lower exploration charges on a cumulative basis, and a favourable tax impact have allowed earnings to grow.

Going forward, sustained production volumes, exploration success, and the trajectory of oil prices and interest rates will remain key determinants of profitability.