POL – earnings up in FY23

The main concern for the E&P sector is the declining production of hydrocarbons amid depleting reserves and small discoveries. However, the oil and gas exploration and production sector continues to benefit from falling currency during, which was also a key growth driver for earnings in FY23. Pakistan Oilfields Limited (PSX: POL) also saw its FY23 earnings increase noticeably by 41 percent year-on-year.

POL’s revenue growth was around 17 percent, year-on-year in FY23 primarily due to PKR losing its value against the greenback. However, the E&P company on the production front continued to see dip in oil and gas production along with 3 percent year-on-year decline in oil prices. In 4QFY23, the net sales for POL were up by only one percent year-on-year amid PKR weakening. Oil prices in 4QFY23 were down by 34 percent year-on-year, and the decline in oil and gas production flows during the quarter was by 10 and 4 percent year-on-year, respectively.

POL witnessed a rise in gross margins in FY23 due to significant decline in amortization of development and decommissioning costs – (65% YoY). POL witnessed a colossal7.7 times increase in exploration and prospecting expenditure in FY23 as there were two dry wells incurred by the E&P firm during the period. Meanwhile, the exploration costs during 4QFY23 were up twice due to higher geological activity during the quarter.

Apart from the rise in topline, the growth in POL’s bottom line in FY23 was also due to increase in other income coming from exchange gains on foreign currency and higher income from cash and cash equivalents. During the year, other income increased by 131 percent year-on-year. On the other hand, other income in 4QFY23 was down by around 18 percent year-on-year due to lower exchange gains. POL also announced a cash dividend of Rs60 during the period, which took the overall dividend for FY23 to Rs80.