FY12 turned out robust for the exploration and production sector. Riding on excessive cash balances and healthy dividend declaration during FY12 coupled with the announcement of Petroleum Policy 2012, the upstream sector seemed all geared up for another strong year.
The performance of the third largest E&P player in the country however, has proved contrary to the expectations and anticipations so far. Where Pakistan Oilfields Limited drew the curtain to an exclusive FY12 for the upstream sector, it commenced the first quarter of FY13 for the E&P sector in quite a dreary manner.
The chief reason for the hitch in the revenue growth came from subdued production flows primarily from the company’s own operating fields like Bela, Pariwali and Pindori. Top line receded by nine percent YoY during 1QFY13 owing to weaker oil production, the main contributor to the company’s revenues.
Similarly gas flows were also strained during the said period on a YoY basis. But it was a combination of both reduced volumes and relatively stagnant oil prices that kept the top line reined in.
Already stemmed by a halt in the top line, the bottom line of the company shrunk by a fat 18 percent YoY during the quarter ended September 30, due to increased seismic activity and no declaration of dry wells. This translated into an extravagant rise in exploration costs.
Also, a significant fall in other income tapered the net earnings of the company. Margins of the E&P entity painted a horrifying picture: gross margins and net margins both dwindled by 900bps on account of higher operating costs mentioned before.
On the brighter side, this is just the beginning of the year. In accordance with the drilling and production plans, exploration and production sector is anticipated to swell during FY13 largely through volume accretion.
Moreover, it is too soon to decipher the fate of this oil company. With sanguine hope from Bela and Makori East I, good news about its other fields like Makori East II and Tal block during FY13 have greater chances of turning tables for the company.
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PAKISTAN OILFIELDS LIMITED
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Rs (mn) 1QFY13 1QFY12 chg
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Net sales 6,646 7,328 -9%
Gross profit 3,840 4,903 -22%
Exploration cost 201 74 171%
Profit for the period 2,566 3,455 -26%
EPS (Rs/share) 10.85 14.61 -26%
Gross margin 58% 67%
Net margin 39% 47%
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Source: KSE Notice