The oil and gas exploration and production sector in the country has been facing a lull in terms of foreign investment. But the local activity has been noticeable in the last few years as all the major players have been indulging in drilling activities across the country; even the security struck areas of Balochistan have attracted the large E&P firms to explore. This has primarily been due to low crude oil prices (apart from the better security situation) that the companies have invested in exploration and prospecting activity to get the fruit in higher oil price scenario.
Oil prices are up now for some time, and the oil and gas E&P sector’s financial performance for FY18 is completely explained by this higher price backdrop. A look at the key listed players in the industry shows that the earnings for FY18 have come from higher prices, which were up by around 22-25 percent during the period.
Growth in revenues for Oil and Gas Development Company Limited for FY18 was 19 percent year-on-year, which trickled down to the bottom line. Besides oil prices, the growth in earnings for OGDCL came from the 5-6 percent depreciation of Rupee during the period. What affected the financials adversely were the increase in operating expenses, which according to the annual report came from salaries and wages, depreciation and amortization of development and production assets on account of capitalization of new wells and change in reserves estimates. Also the explorations costs were up as higher cost of 11 dry and abandoned wells in FY18 versus four in FY17 affected business financials.
Mari Petroleum Company Limited, Pakistan Oilfields Limited, and Pakistan Petroleum Limited also posted higher earning largely on account of increase in oil prices and depreciation of the currency. For FY18, exploration expenses have been higher for mostly all E&P companies due to higher seismic activity and higher number of dry and abandoned wells. Unlike the others, POL witnessed improvement in production flows as well which boosted its bottom line.
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