A key player in the local E&P oil and gas sector, Pakistan Oilfields Limited (PSX: POL) is primarily engaged in the exploration, drilling and production of crude oil and gas in the country. It is a subsidiary of the Attock Oil Company Limited (AOC). After its incorporation in 1950, it took over the exploration and production business of the group in 1978, and since has been investing independently and entering into JV partnerships with various local and foreign E&P firms
Its product portfolio includes crude oil and natural gas, and it also produces LPG that it markets under its brand name POLGAS as well as its subsidiary, CAPGAS (Private) Limited. POL also produces solvent oil and Sulphur, and has a vast pipeline network for transporting the crude oil to the group's refinery, and its associate company: Attock Refinery Limited (ATRL).
Company associates and shareholdings
Besides Attock Refinery Limited, POL's other associate companies include National Refiner y (NRL), Attock Petroleum Limited (APL), Attock Cement Limited, Attock Gen. Limited, and Attock Information Technology Services. More than half of the company's shareholding rests with the Attock Oil Company (AOC), which is the group. Another shareholder with more than 5 percent of the shareholding is the State Life Insurance Corporation of Pakistan. A category-wise breakup of the shareholding is shown in the illustration.
Past performance
As the name suggests POL has been an oil heavy company where its crude oil revenues have accounted for over 55-60 percent in the past, while natural gas has accounted for 20-25 percent of the total sales; A look back at FY15 shows that the E&P company suffered at the hands of declining crude oil prices; At the same time higher exploration and prospecting expenditure in year further axed the profits for the year. However, the company witnessed positive growth on the volume side especially that of crude oil.
Then in FY16, the revenue growth for POL remained constrained as the oil prices touched historic lows, which also impacted the bottom-line that declined by 14 percent, year-on-year. But unlike FY15 where the firm showed positive growth in production volumes, FY16 was marred with slowing down production by around 2-3 percent from its key fields like Mamekhel and Manzalai fields. This time however, some respite to the bottom-line came from lower exploration and prospecting expenditure.
FY17 was a better year for the E&P sector as the oil prices rebounded and POL's revenues and earnings were up by 10 percent and 34 percent, year-on-year respectively after continuously declining for the two years. Where exploration costs remained under control POL witnessed a drop in production flows from its key Tal block.
FY18 was successful for POL in terms of new finds and operations. In FY18, POL made four new exploratory successes, which included Jandial - a field that reportedly has high production prospects. Three of its development wells were also successful in the fiscal year. Revenues climbed by over 19 percent, and profit after tax grew by 17.6 percent, year-on-year. Growth in the top-line came from better crude oil prices as well as highest crude oil production in the company's 10-year history. Exploration costs remained on the higher side for POL in FY18 due to seismic acquisition of Balkassar Lease, DG Khan and Gurgalot block, and dry and abandoned wells and some irrecoverable costs. What was an added factor to company's profitability in FY18 was the in exchange gains due to depreciating currency, shown as part of other income.
POL 9MFY19 performance & beyond
POL's performance in 9MFY19 was largely driven by higher crude oil prices and depreciation Rupee. Increase in average crude oil and gas price was by 13.4 percent and 25.7 percent, respectively during the period. Crude oil and gas production remained stagnant (actually crude oil declined by 1.5 percent year-on-year in 9MFY19). Pakistan Oilfields Limited's (PSX: POL) earnings growth for the latest quarter (3QFY19) remained sluggish and the company announced only a marginal increase in earnings.
POL's top-line grew by 50 percent in 9MFY19 and by 22 percent year-on-year in 3QFY19. Where production volumes remained up in 1HFY19, the volumetric growth remained subdued in 3QFY19. POL's earnings for 9MFY19 were up by 42 percent year-on-year, which largely came from the growth attained in the first two quarters of FY19. Earnings for 3QFY19 were up by only 6 percent year-on-year, where the profits were cut short by higher amortization costs and significantly higher exploration and prospecting expenditure due to a dry well cost incurred during the period.
The overall profits for 9MFY19 were also higher due to the low base effect arising from a Rs3.01 billion write down booked in 2QFY18 due to the absence of enhanced gas pricing (post conversion to Petroleum Policy 2012) for production from three Tal block fields. Going forward, higher cure oil priced and depreciating currency will continue to drive growth for the E&P sector's earnings.
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POL-Pattern of shareholding (As on June 30, 2018)
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Categories of Shareholders Percentage
Banks & Financial Institutions 6.90%
Associated Companies 52.86%
Public Sector Companies 1.14%
Modaraba Companies 0.00%
Mutual Funds 9.16%
Investment Companies 2.15%
Insurance Companies 8.97%
Individuals 15.91%
Others
Employees Old Age Benefits Institution 1.23%
Deputy Administrator Abandoned Properties 0.00%
Employees Pension/Provident Fund 0.87%
Charitable Trusts & Foundation 0.79%
Total 100.00%
Shareholders holding 05% or more voting interest
The Attock Oil Company Limited (also shown under associated companies) 52.75%
State Life Insurance Corp. of Pakistan (also shown under insurance companies) 5.67%
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Source: Company accounts
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PAKISTAN OILFIELDS LIMITED
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Rs (mn) 3QFY19 3QFY18 YoY 9MFY19 9MFY18 YoY
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Net Sales 10,682 8,747 22% 32,891 21,987 50%
Operating cost 2,822 2,391 18% 8,336 6,519 28%
Royalty 1,087 1,360 -20% 3,331 2,450 36%
Amortization of development and decommissioning costs 1,014 802 26% 2,817 2,292 23%
Gross Profit 5,683 4,112 38% 18,175 10,496 73%
Exploration and prospecting expenditure 1,097 275 299% 1,907 1,015 88%
Admin expense 47 53 -10% 155 142 9%
Finance cost 315 543 -42% 2,064 1,219 69%
Other charges 349 243 44% 1,216 636 91%
Other income 849 741 15% 3,957 2,306 72%
Profit after Tax 3,287 3,107 6% 11,148 7,868 42%
EPS (Rs/share) 11 58 1094 6% 39 37 27 72 42%
Gross margins 53 20% 47.01% 55.26% 47.74%
Net margins 30 77% 35.52% 33.89% 35.78%
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Source: PSX
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