Pakistan Oilfields Limited

This time around, Pakistan Oilfields Limited posted results in line with the market consensus estimates. The market had forecasted growth in earnings of 9MFY12 somewhat similar to that of 1HFY12 with calculations backed by escalating crude prices, marginal exploration and production activity and hastened decommissioning of its exploratory well in POL operated Ikhlas block.
The top line for 9MFY12 expanded by 20 percent to Rs23.7 billion increasing from Rs19.8 billion in 9MFY11. This growth was driven primarily by marginal increase in oil and gas production figures and elevated oil and gas realised prices based on international crude intensification.
Some lift to oil and gas production and hence the top line was brought in by the growth in statistics from non operating Tal block. However, the potential for full fledged growth in revenues was truncated by cowed exploration and production activities in its operated blocks during the period.
The bottom line for 9MFY12 augmented by 19 percent, satisfactorily at par with market estimates. The growth witnessed is precisely due to the expansion turnover of the company. The gross profit was constrained by higher than expected 85 percent rise in amortization charges relating to development and decommissioning cost. Gross margins also dropped some by one percent for 9MFY12.
Bottom line for 9MFY12 eased firstly on account of reduced exploration and prospecting charges by 69 percent, definitely not a healthy sign for a company with exploration and production as the core business activity. Secondly, 71 percent increase in income from associates and healthy cash and bank balance enabled the firm make profits on bank and other deposits.
During 3QFY12, the EPS grew by 20 percent YoY to Rs13.38 per share. Sales revenue increased during the three months ending March FY12 by a humble 13 percent which was a consequence of slightly slower exploration and production activity compared to previous periods.
Going forward, the company and hence the E&P sector is hoping to witness strengthening of the drilling and development activities emanating from the improved gas pricing suggested by the new petroleum policy for new blocks. Additionally, the efforts by the ECC to facilitate fast track development and production from existing discovered low btu gas reservoirs might be encouraging for the E&P landscape.