PPL – profits keep growing

Pakistan Petroleum Limited (PSX: PPL) started FY23 on a jovial note with growth in revenues and profits in first quarter of FY23 primarily driven by higher prices as well as weaker domestic currency along with lower expenses, But production remained tepid. PPL in its recently announced financial performance for 2QFY23 shows that the earnings growth continued with its highest ever half yearly topline.

PPL had all things going in its favor for its revenues with the rise in hydrocarbon production. During 1HFY23, PPL’s revenues were seen growing by 54 percent year-on-year due to 27 percent year-on-year increase in crude oil prices; 19 percent year-on-year jump in Sui wellhead gas prices and increase in crude oil and gas production by 2 and 7 percent year-on-year, respectively. In 2QFY23, the company’s topline accentuated by 40 percent year-on-year due to 13 percent year-on-year higher oil prices; currency depreciation; rise in Sui gas wellhead prices; and a noticeable jump in production oil and gas during the quarter.

Growth in PPL’s earnings for 1HFY23 was however restricted by double growth in exploration and prospecting expenditure especially during the second quarter; and decline in other income during the six month period as well as 2QFY23. Also, the company incurred higher other charges, which could partially be due to higher provision for windfall levy on oil and condensate and WPPF especially in 1QFY23 as highlighted in its director’s report for the first quarter. The decline in other income was due to lower exchange gain on foreign currency during the period as highlighted in a research note by AHL. Similarly, the other income was down by 33 percent year-on-year in 2QFY23 amid the absence of exchange gains.

PPL’s bottmline for 1HFY23 was up by 54 percent year-on-year, while that in 2QFY23 was up by 52 percent year-on-year. The E&P giant announced an interim cash dividend of Rs1 per share in 2QFY23 where the future dividend announcement is likely to be based on improved cash flows during 2HFY23due to gas price hike; and higher capex resulting from the upcoming round of new auctions in May 2023.