Pakistan Oil Fields

Amidst the frenzy of financial results at the KSE, Pakistan Oil Fields said on Friday that it earned 57 percent more profit in the quarter ending September than it did in the year-ago period. Ordinarily, the news should have been good enough to boost POLs share price at the bourse, but it didn , as the results were much lower than expectations.
POL has fared better than any of its peers in the first quarter of FY11 on the production front, as a massive increase in production volumes over last year led to a significant surge in revenues - all thanks to the Manzalai field that acted as the saviour.
It was the commissioning of Manzalai CPF in November that boosted the firms production. Moreover, the Pindori field also contributed significantly towards the enhanced production and mitigated the production loss from the Pariwali field.
A commendable 18 percent and 170 percent jump in oil and gas production, respectively, during the quarter, was well supported by the realised prices. The oil and gas realised prices significantly bettered by 16 percent and 19 percent, on the back of positive movements in the international crude oil price and a slight depreciation in the rupees value against the greenback.
The exploration cost, however, unexpectedly remained on the higher side. Analysts were not expecting exploration cost to exceed Rs20 million for the quarter, as seismic activity carried during the period was subdued and, more importantly, the company did not declare any wells dry. It seems that a field or two might have hit a cost overrun as inflationary pressures take the toll on exploratory expenditure.
The half-yearly results will bring more to cheer for the investors, as the completion of three exploratory wells alongside the field start-up in Maramzai would further augment production volumes. The wellhead gas prices are on the rise and so is the international crude oil price, which bodes well for the companys top line in the future.
A strong support to the bottom line is also expected to be handed by huge dividend incomes form Attock Petroleum and National Refinery. The company might well book the one-time gain on account of the reversal of a dry well that was expensed earlier, which could yield improved net margins. A healthy interim dividend with the December results cannot be ruled out either. No wonder, POL remains the top pick of many analysts in the market.

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POL P&L

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Rs (mn)                1Q      1Q      %

                     FY11    FY10    chg

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Sales               5,394   3,175    70%

Cost of sales       2,185   1,293    69%

Gross profit        3,208   1,883    70%

Gross margins         59%     59%     0%

Exploration cost      105      53    98%

Other income          271     285    -5%

PAT                 2,233   1,426    57%

EPS (Rs)             9.44    6.03

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Source: KSE notice

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