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As the title suggests, one key factor in driving growth in Pakistan Oilfields Limited’s (PSX: POL) earnings during 1HFY20 was the currency depreciation. The real performance indicators of an oil and gas E&P company like production volumes, or exploration and drilling activity, some key discoveries were all missing in 1HFY20 performance for POL.

But POL is not an exception. The domestic oil and gas exploration and production sector has been sluggish of late. The production flow whether of gas or crude oil are not showing any signs of growth. The overall crude oil volumes and gas volumes have actually seen a decline in the first six months of FY20. The government is seen taking some steps like some changes to the petroleum policy and announcing of new blocks, which are hoped to spur growth in production volumes as well as investment in the sector.

Revenues for POL in 1HFY20 as well as in 2QFY20 were tepid, declining by around 2 percent, year-on-year. Apart from weakness in production flows i.e. absence of year-on-year growth in crude oil and natural gas production – weaker realized crude oil prices also pulled the topline down. Crude oil and gas production by POL is estimated to be lower by 9 and 5 percent, year-on-year, respectively, while the realized oil prices during the six months were down by around 20 percent year-on-year.

Even though exploration and prospecting costs remained low in 1HFY20, significant increase in 2QFY20 was because of some seismic data acquisition during the quarter. Apart from that, other income growth was also missing. Had it not been for significantly lower tax expense in the period(s) under review, the E&P company would not have depicted growth in earnings it now portrays. POL’s earnings before tax for 1HFY20 were only up by one percent, while those in 2QFY20 slipped by 12 percent year-on-year.