In 1QFY26, the E&P sector’s profitability fell by 8 percent year-on-year, reflecting lower oil and gas output, weaker realized prices, and reduced other income. Sector revenue declined by 9 percent, though OGDC’s higher dividend helped lift the overall payout ratio. Among major players, POL’s profit rose 111 percent, while OGDC, PPL, and MARI saw earnings decline due to lower sales and higher royalty expenses.
Pakistan Petroleum Limited (PSX: PPL) reported a 15 percent drop in profit for 1QFY26 as reduced hydrocarbon production and softer oil prices weighed on results. Net sales were down 14 percent, due to lower output and weaker average oil prices.
On the cost side, operating expenses decreased 8 percent, reflecting lower production and tighter cost control. The gross margin stood at 60.8 percent, slightly below 61.6 percent a year earlier. Exploration costs plunged 58 percent, as no dry well expenses were booked this quarter—unlike last year’s one-time charge.
The largest drag came from a 68 percent decline in other income, driven by lower interest rates and the absence of non-recurring gains such as insurance recoveries recorded last year. Alongside the results, PPL announced a Rs2 per share dividend, raising its payout ratio to 27 percent, up from 23 percent last year.
PPL’s liquidity position improved, and steady near-term cashflows are expected amid better collections and recent gas price hikes. However, concerns persist across the E&P sector about declining reserves, fluctuating production, and limited exploration.
At its recent AGM, PPL emphasized a strategic shift toward frontier and offshore exploration, international expansion, and resource diversification. Despite production curtailments and receivable challenges, the company foresees robust medium-term growth through new offshore projects, improved collections, and mining ventures.
PPL expects production from the Abu Dhabi Offshore Block 5to begin by FY28–FY29. It is also pursuing nearby block acquisitions and progressing with its Eastern Offshore Indus C Block in partnership with Turkish Petroleum. And the E&P giant remains optimistic about resolving gas sector circular debt, taking cues from the improvements seen in the power sector.