Pakistan Oilfields Limited (PSX: POL) along with the other oil and gas exploration and production (E&P) companies has undoubtedly been a victim of low crude oil price, which has affected the firm's profitability since FY15.
For the first nine months of FY16, POL depicted an unsurprising decline in its bottom line due to weaker international crude oil prices. The attrition in earnings started at the top where the firm saw its revenues decline by 24 percent year-on-year. POL is an oil heavy firm and therefore bears a strong sensitivity to crude oil price movement. During the nine-month period, there has been a 48 percent decline in average Arab light crude prices.
Along with low price environment, POL also saw a clip in its production flows; oil volumes decreased by around four to five percent year-on-year in 9MFY16. The decline in crude oil production largely emanated from lower volumes from Mamekhel and Makori East fields. Decline in Makori East field was due to its technical shutdown in earlier parts of FY16.
What helped the bottom line was the reduction in exploration costs. While 3QFY16 saw a sizeable increase, the exploration and production costs in overall 9MFY16 were down by 58 percent year-on-year due to reduced magnitude of dry well write-offs.
POL's earnings for 9MFY16 were down by 21 percent year-on-year. However, key growth triggers for the firm in the near future include production commencement from Mardankhel along with the drilling of three exploratory sites in TAL Block.
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