POL in 9MFY24

During the nine months of FY24, the oil production by the exploration and production sector in the country witnessed an uptick of one percent year-on-year, whereas gas production depicted a 3 percent year-on-year decrease. These stats were fueled by oil production of three percent year-on-year growth in 3QFY24 and, a decline of two percent year-on-year in gas production. For Pakistan Oilfields Limited (PSX: POL), oil and gas production declined by 5 and 2 percent year-on-year during 9MFY24, respectively.

On the financial performance side, the oil and gas E&P company announced its results for 9MFY24 where the earnings were flattish– falling by 2 percent year-on-year despite the 10 percent growth in revenues. The topline growth was largely fueled by the prices and weakening of PKR as the company’s production flows (oil and gas) were down during the period (as mentioned above).

On the expense side, POL’s exploration expenses also declined by 77 percent year-on-year during 9MFY24 due to the absence of dry wells. Overall, 9MFY24 was a slow period in terms of drilling activity. The sector drilled 11 exploratory wells and 30 appraisal/development wells against a target of 21 exploratory wells and 35 appraisal/ development wells.

Despite higher revenue and lower exploration expenses, POL’s earnings were still down during the period, which was due to a significant decline in other income and higher taxation. The fall in other income was due to an exchange loss on foreign currency.

3QFY24 revenue growth stood at 3 percent year-on-year where the oil prices were up by around 8 percent year-on-year, but the oil production was down by two percent. Also, what kept the revenues up was the PKR depreciation that continued during the quarter. POL’s earnings for 3QFY24 were down by 24 percent due to slow growth in the top line and a slide in other income.

Depleting reserves and small discoveries have been affecting the E&P sector’s production flow. POL has been facing the same challenges, which affect profitability. However, according to a research note by Optimus Capital Management, an addition in the company’s production profile could be expected as the company is drilling a new well in Jhandial, and MOL is drilling in a new field in Tal block where POL has a 21 percent stake.