Rising oil prices may be a headache for a few, but Pakistan Oilfields Ltd (POL) clearly enjoyed the oil price rally, as is evident from the full year FY11 financial results announced yesterday. Everything went according to the script as the earnings were strictly in line with the consensus estimates.
Yet, POLs share price took a slight dip, possibly because of high anticipation of a bonus announcement, which did not come true.
The phenomenal top line growth was a result of the simplest of phenomenon - higher volume and higher price. The sizeable growth in production flows during the year stemmed from targeted drilling and exploration activities carried in the earlier period, reaping fruits in FY11.
Gas production inched up by nearly 40 percent year-on-year, mainly on the back of the Manzalai field that acted as the savior as other major fields either remained flat or otherwise showed decline. The commissioning of Manzalai CPF in November 2010 boosted the firms gas production. Moreover, Pindori field also contributed significantly mitigating the production loss from the Pariwali field.
The firms oil production also improved, although it paled in comparison to that of the gas production increase, yet the 10 percent year-on-year growth in oil production combined well enough with higher oil prices to fatten the revenue size. Majority of the increase in oil production owed to significant rise in non-operated joint ventures, especially Tal block, which registered a 66 percent year-on-year rise.
Product prices increased significantly following the uptick in global crude oil prices. Although, oil prices somewhat eased in the 4QFY11, the Mena region unrest earlier in the fiscal year was enough to clock the realized oil prices up by 22 percent year-on-year. Wellhead gas prices too, as a consequence of higher crude prices, showed a steady increase, registering a 14 percent year-on-year jump.
The company was lucky enough to have reported a mere one dry well during the period, that of MOL exploratory well, in which POL has 30 percent interest. This, coupled with relatively slow seismic activities, kept the exploration expenditures in check.
The bottom line owing to the integrated structure of the group got a boost - with POL reaping dividend incomes form Attock Petroleum Ltd and National Refinery, especially in the first half of the year.
All seems well for the ongoing FY12 as the production flow is widely expected to remain firm, primarily due to the strong asset base in Tal block. With the production flow having started from Makori East and other strong discoveries, the top line is expected to strengthen further going forward. The crude oil prices may not grow as much as they did in FY11, but with limited downside risks, fundamentals appear strong for the firm.
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Pakistan Oilfields Ltd
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(Rs mn) FY11 FY10 chg
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Sales 24,951 17,845 40%
Operating cost 5,538 4,082 36%
Gross profit 15,628 10,886 44%
Gross margin 63% 61% 3%
Exploration cost 1,075 1,606 -33%
Other income 1,809 1,377 31%
PAT 10,815 7,437 45%
EPS (Rs) 45.72 31.44
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Source: KSE notice