All is well at PPL

Pakistan Petroleum Limited is in good health. The 9MFY11 financial results show a sizeable growth in revenue that spurred the bottom line considerably.
Despite a slip in production flows of 9 percent and 17 percent from major contributing fields; namely Sui and Kandhkot, the overall production during the third quarter increased ever so slightly. Gas production during the quarter was down by 1 percent year-on-year; however, the 9MFY11 gas production shows a sizeable 3 percent improvement.
On the oil front, the production flow was phenomenally improved as it increased by 47 percent year-on-year during 3QFY11 and 61 percent during 9MFY11 versus the same period last year.
The enhanced production is primarily a result of start up of the Manzalai CPF after November, which triggered massive improvement in production volumes from the Tal Block. Furthermore, the start-up of Napsha and Adam exploratory wells supplemented the production growth during the period.
The field expenditures, however, remained on the higher side, surpassing consensus estimates by a fair margin. The higher production obviously had its say in swelling field expenditures, but it seems that the increased focus on seismic activities had its impact too. The company engaged in 2D seismic shots of nearly 850 km and seems to have faced a massive cost overrun in an effort to arrest the falling yields.
Moreover, declaration of a dry well, and the expensing of the cost thereof at Jeherruck also played its part in augmenting the exploration cost.
PPLs healthy cash position enabled it to invest more, thus explaining the resultant increase in interest income, which soared by Rs1 billion during the period. The company also cites the higher interest rate scenario as a key reason for improved performance on this account.
The firm seems to enjoy a healthy cash flow as the circular debt issue does not seem to hamper the firms liquidity a great deal; albeit, the receivables have mounted of late. It seems the management is not concerned yet, as there is no special mention of circular debt in the published accounts, unlike those who are more affected.
The company seems on track towards completion of its yearly exploration targets and the favourable pricing scenario is just an icing on the cake.

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PAKISTAN PETROLEUM LIMITED

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(Rs mn)                   3QFY11   3QFY10   chg   9MFY11   9MFY10   chg

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Sales                     20,470   17,455   17%   57,886   42,742   35%

Field expenditures         5,053    5,003    1%   15,032   12,719   18%

Gross profit              13,046   10,387   26%   36,049   24,999   44%

Gross margin                 64%      60%    7%      62%      58%    6%

Other income               1,167      667   75%    3,077    1,907   61%

Other operating expenses     977      759   29%    2,692    1,851   45%

PAT                        7,733    6,984   11%   24,351   16,738   45%

EPS (Rs)                    6.47     5.84          20.38    14.01

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Source: KSE notice

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