Pakistan’s E&P cos expected to record significant profit drop amid sales decline

Pakistan's top energy producers are expected to report a decline in profits amid drop in sales and exchange losses, stated Topline Securities in its latest report.

As per the report, Pakistan’s listed E&P companies are likely to record a 8 percent YoY and 13pc QoQ decline in their profits during the second quarter of FY21, primarily due to likely decline in net sales by 14pc YoY and 7pc QoQ and exchange losses amid PKR appreciation.

The report stated that the net sales are likely to decline as a result of PKR appreciation resulting in lower revenues and exchange losses and fall in hydrocarbon production by 1-11pc YoY for Oil and Gas Development (OGDC), Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL).

However, the exploration cost is also likely to decline by 63pc YoY and 2pc QoQ.

The report expects OGDCL EPS at Rs 4.7 down 21pc YoY and 13pc QoQ. “Earnings are likely to decline due to a drop in oil and gas production by 3pc and 11pc YoY, respectively. The decline in exploration cost of 40pc YoY (Rs 3.9 billion) is likely to partially offset 60pc YoY decline in other income. We expect exchange losses of Rs 1.8 billion to be reported in other income during 2QFY21. We expect company to declare interim dividend of Rs1.5 per share.”

On the earnings of PPL, the report expect PPL’s EPS at Rs4.7 up 24pc YoY but down 11pc QoQ. “Earnings on a sequential basis will decline due to increasing in other expenses by 45pc to Rs 3 billion due to exchange losses. Exploration cost is forecasted at Rs 826million due to 3D seismic acquisition of Shah Bandar block.”

Regarding POL, the report said that it expects POL’s EPS Rs 11 for 2QFY21, down 31pc YoY and 21pc QoQ.

“Fall in earnings can be attributed to 4pc YoY and 7pc YoY decline in oil and gas production, respectively coupled with PKR appreciation. Other income is expected at Rs -135 million versus Rs 707 million due to exchange loss of rupees 700 million. We expect companies to declare an interim dividend of Rs 20 per share.”