After a staggering increase in earnings for FY17 (by almost double) with a good fourth quarter, Pakistan Petroleum Limited (PSX: PPL) announced another good quarterly performance. 1QFY18 was again painted by more than twice increase in profits, with a spike in margins. Compared to a quarterly and annual average of around 30 percent in the last three years, net margin for 1QFY18 was higher at over 39 percent.

PPL’s revenues for the first three months of FY18 were a product of higher production figures, improved oil prices, and hence an upward revision of Sui’s wellhead gas price by around 80 percent to $2.66 per million BTU.

Apart from the regular price and production combination, PPL also benefited from what Elixir Securities call one off Rs4.2 billion revenue addition, attributable to the impact of wellhead gas price revision of Tal Block fields.

Exploration costs make up a significant portion of an E&P company especially when there are any abandoned or dry wells recorded. However, PPL’s earnings announced were higher than what the markets was expecting, partly because of a reversal of exploration expense. Despite lower exploration expenditure, PPL has been working aggressively in the field; the firm’s latest press release highlights that a record 43 wells were drilled in operated and partner-operated assets while deploying highest-ever13 rigs operation with a notable reduction in drilling time and cost. The CEO has also stated that the E&P giant crossed the 1 billion cubic feet per day (bcfd) mark in 2016-17, leading to 8 percent growth in gas production year-on-year, besides 108 percent reserves replacement.

In a separate notice to the PSX a few days earlier, the company had also apprised that Asia Resource Oil Limited (AROL) finally settled its civil case of outstanding dues/late payment surcharges on Gambit South, Naushahro Feroz and Kotri North Blocks and forfeited its 10 percent working interest in Naushahro Feroz in PPL’s favour, which will provide an added lift to the earnings in the coming quarters.