POL in 1HFY25

Pakistan Oilfields Limited (PSX: POL) showcased resilience in 2QFY25 despite facing challenges from lower crude prices and reduced production volumes. The profit after tax for 2QFY25 stood at Rs7.6 billion, reflecting a 4 percent year-on-year decline, though quarterly earnings surged 195 percent compared to the previous quarter, benefiting from the absence of dry well costs recorded in 1QFY25. For 1HFY25, earnings dropped 42 percent year-on-year to Rs10 billion, primarily due to higher exploration costs associated with a dry well.

Net sales for 2QFY25 were recorded at PKR 14.8 billion, marking a 15 percent year-on-year decline due to a 14 percent drop in average realized oil prices and lower production volumes, with oil production decreasing by 6 percent year-on-year and gas production by 9 percent. Operating costs decreased by 5 percent year-on-year due to improved cost management, though exploration costs rose by 51 percent year-on-year due to increased geological and geophysical activities.

For 1HFY25, POL’s net sales witnessed an 11 percent decline compared to 1HFY24, driven by a combination of lower production and a 14 percent decrease in realized oil prices. Gross profit for 1HFY25 dropped 16 percent year-on-year while operating profit declined by 50 percent year-on-year. Exploration costs surged 7x year-on-year to Rs8.4 billion, reflecting the significant impact of dry well expenses. On the positive side, other income increased by 8 percent year-on-year to Rs8.4 billion, supported by improved cash positions. The effective tax rate for 1HFY25 was down during the period, providing some relief to the bottom line.

POL declared a dividend of Rs25/share for 1HFY25. Other income surged by 61 percent year-on-year, supported by an improved cash position despite lower fixed-income yields, while the effective tax rate decreased slightly to 37 percent in 2QFY25 from 39 percent in the same quarter last year. The company’s oil and gas output continued to face downward pressure due to natural depletion and operational constraints. During the quarter, POL avoided new dry well drilling, focusing instead on geological assessments, significantly reducing exploration costs on a quarterly basis.

The challenges faced by POL reflect broader trends in Pakistan’s exploration and production (E&P) sector, which in CY24 encountered a mix of progress and hurdles. Government efforts to address circular debt, along with policy reforms to streamline regulatory processes and attract investments, provided much-needed support to the sector. However, operational challenges, including import restrictions and project delays, hindered progress, while fluctuating global oil prices and currency devaluation put pressure on revenues. Looking ahead, POL’s management anticipates enhanced production flows during 2HFY25.