Where the E&P companies continued to benefit from falling currency during 1QFY23 with growth that boosted earnings, the appreciation of the domestic currency against dollar during the second quarter of FY23 contained the growth in the exploration and production sector’s bottomline. PakistanOilfields Limited (PSX: POL) also saw its 2QFY23 earnings increase modestly by 5 percent year-on-year during 2QFY23.
POL’s revenue growth was around 27 percent, year-on-year in 1HFY23 due to 18 percent year-on-year higher crude oil prices and 24 percent currency depreciation. The E&P company on the production front continued to see dip in oil and gas production. In 2QFY23, the revenues for POL were up by 11 percent due to 8 percent rise in average realized crude oil price and amid currency appreciation during the quarter. The production front remained weak as oil and gas production flows during the quarter were down by 10 and 9 percent year-on-year, respectively.
POL witnessed a colossal increase in exploration and prospecting expenditure in 2QFY23 as well as 1HFY23 due to one dry well and two dry wells incurred during the period, respectively. Apart from the rise in topline, the growth in POL’s bottomline in 1HFY23 was also due to increase in other income coming from exchange gains from currency depreciation. On the other hand, other income in 2QFY23 was up by only 4 percent year-on-year due to currency appreciation but higher income from cash and cash equivalents.
The main concern for the E&P sector is the declining production of hydrocarbons amid depleting reserves and small discoveries. POL’s announcement of cash dividend of Rs30 during the period was largely below the market expectation because it is being linked to the company investing in drilling and exploration activity to boost its production and taking part in the upcoming round of block auction in May 2023, which will bode well for the company.
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