Pakistan Oil Fields (POL) has reaped the fruits of higher production flows during the 1HFY11, with profits rising by a massive 57 percent. Interestingly, the quarterly profits too, were bettered by the same magnitude - all in line with consensus estimates, as higher realised prices were expected to drive the bottom line to improved levels.
POL fared better than its peers in the first half FY11 on the production front, as a substantial increase in production volumes over last year led to a significant surge in revenues. The overall year-on-year rise in production is believed to have stood at 41 percent, with oil and gas production increasing by 21 percent and 80 percent, respectively.
The rise in gas production also has a lot to do with the Manzalai field that acted as POLs saviour. It was the commissioning of Manzalai CPF in November 2010 that boosted the firms production. Moreover, Pindori field also contributed significantly towards the enhanced production and mitigated the production loss from the Pariwali field.
To top it off, the rise in production was well supported by higher realised prices of both oil and gas as oil prices in the international market continued the upward trend, triggering an upside in wellhead prices with a lag. The 14 percent uptick in benchmark crude oil prices led to higher development returns as realised prices of both oil and gas improved considerably.
Higher production flows from gas fields also resulted in a major shift in the revenue mix, enabling POL to slowly reduce its dependence on oil revenues. Gas revenues are expected to have contributed nearly 40 percent to the revenues, as against 29 percent in the same period last year, as a result of both improved production and favourable prices.
On the exploration side, the cost remained on the lower side as there was subdued seismic activity carried during the period and, more importantly, the company did not declare any wells dry.
A strong support to the bottom line came from the other income as POL reaped dividends form Attock Petroleum and National Refinery. Nearly Rs500 million are expected to have been booked by POL on account of dividend income from its investment in APL and NRL in the second quarter alone.
The Tal block production levels have significantly improved of late. Moreover, the flows from the recently commenced Maramzai and Mamikhel wells indicate a significant increase better-than-expected production, which bodes well for the company. The oil prices too, remain in favour of the company, so a healthy future is what awaits POL.
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POL P&L
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Rs (mn) 1HFY11 1HFY10 Chg 2QFY11 2QFY10 Chg
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Sales 11,575 7,591 52% 6,182 4,416 40%
Cost of sales 4,466 3,038 47% 2,281 1,745 31%
Gross profit 7,109 4,553 56% 3,901 2,671 46%
Gross margin 61% 60% 2% 63% 60% 4%
Other income 1,030 846 22% 759 561 35%
Exploration costs 300 579 -48% 196 526 -63%
PAT 5,201 3,319 57% 2,968 1,893 57%
EPS (Rs) 21.99 14.03 12.55 8.00
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Source: KSE notice
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