First half net profits of Pakistan Oil Fields may have dwindled by 14 percent. But whats of more relevance is its second quarter financial result that signals a healthy future for the company.
The commendable second quarter performance comes on the back of higher output from Manzalai field - as the commissioning of Manzalai CPF in November boosted the firms oil and gas production by 14 percent and 57 percent respectively.
POLs revenues owe a large thanks to the depreciating rupee that pushed wellhead gas prices, which have a larger share in the revenue mix, by 3 percent quarter-on-quarter in rupee terms. Wellhead oil prices also benefited from rupees weakening against the dollar as well as from the impact of a marginal increase in global crude oil prices.
The firms lacklustre engagement in seismic activities brought down its exploration cost by threefold providing a much needed breather to its bottom line. Moreover, the fact that the firm, unlike the year ago period, did not hit any dry well during the six months ending December 2009 also helped it keep a check on exploration costs.
All seems well for the company in the near future, as wellhead gas prices for the latter half of FY10 have been revised upwards. And though global crude oil prices are not moving as briskly as they were earlier, they have found a stable momentum, which should be good enough to boost POLs revenues given the rebound in oil and gas production from various fields.
Latest energy production data for the E&P sector show that the firms major contributing field Manzalai saw immense growth in oil and gas production in the opening week of February. Furthermore, the firm has four exploratory wells under drilling process - all in areas of strong prospects, which could act as a catalyst to POLs production in the latter half of the year.
As for the currency impact, there are thin chances that the rupee, after having found a bit of stability lately, would start recovering its grounds - something which is all what POLs management would hope for, since its revenues streams are pegged to the greenback. No wonder why the companys stock in the market is being tipped among the ones with the brightest of future ahead.
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POL P&L
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Rs (mn) 1HFY10 1HFY09 % chg 2QFY10 2QFY09 % chg
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Sales 7,591 8,653 -12% 4,416 3,782 17%
Cost of sales 3,038 2,828 7% 1,745 1,331 31%
Gross profit 4,553 5,825 -22% 2,671 2,452 9%
Gross margins % 60% 67% -11% 60% 65% -7%
Other income 846 1,410 -40% 561 1,112 -50%
Exploration costs 579 1,748 -67% 526 1,495 -65%
PAT 3,319 3,866 -14% 1,893 1,605 18%
EPS (Rs) 14.03 16.34 -14% 8.00 6.79 18%
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Source: KSE announcement