POL strikes despite production dip

The oil production of Pakistan witnessed an uptick of 1.4 percent year-on-year in FY24. Meanwhile, gas production depicted a 4.4 percent year-on-year decrease. For Pakistan Oilfields Limited, oil and gas production fell during FY24 by 6 and 5 percent year-on-year respectively.

However, the company reported a growth in profitability and dividends, despite a decline in oil and gas production. For FY24, POL’s revenue growth stood at 7 percent year-on-year, which was primarily driven by the depreciation of the Pakistani rupee, offset the impact of declining oil and gas production.

The company’s bottomline also showed a growth of around 7 percent year-on-year to Rs39 billion for FY24. And one of factors behind earnings growth besides topline rise was a sharp reduction in exploration costs. The company’s exploration expenses fell by a remarkable 76 percent year-on-year, mainly attributed to the absence of dry wells during the year, which had contributed heavily to the previous year’s expenses.

Operating expenses, however, saw a 9 percent year-on-year increase, driven by higher costs associated with the company’s ongoing operations. Despite the rise in operational expenses, POL witnessed a growth in gross margins.

The company’s other income for FY24 declined by 39 percent year-on-year primarily due to the absence of foreign exchange gains that had bolstered earnings in the previous year. However, in the fourth quarter of FY24, other income rose by 21 percent year-on-year reflecting higher returns on the company’s cash and investment balances.

Despite the decline in oil and gas production, POL maintained solid operational performance. The drop in production was primarily a result of natural reserve depletion. The exploration activities were scaled back, resulting in lower geological and geophysical costs. Looking ahead, POL faces challenges due to its reliance on a limited number of non-operated blocks, which are depleting rapidly. The company’s exploration and development efforts have been relatively passive. However, POL continues to offer a robust dividend yield, making it an attractive option for income-focused investors.