PPL FY24 – earnings growth amid production decline

For FY24, Pakistan Petroleum Limited (PSX: PPL) reported a 17 percent year-on-year growth in earnings, despite facing challenges in both revenue generation and cost management. The company’s profitability growth was primarily driven by a favorable court ruling that allowed a reversal of tax provisions related to depletion allowances during the year.

On the revenue side, PPL’s net sales increased marginally by one percent year-on-year. This modest growth was mainly attributed to the depreciation of the PKR against the US dollar by 12 percent year-on-year, which offset the decline in oil and gas production volumes. PPL’s oil production declined by three percent year-on-year, while gas production dropped significantly by 13 percent, primarily due to operational challenges and supply halts. In the last quarter (4QFY24), PPL saw an 11 percent rise in profits.

On the cost side, operating expenses surged 13 percent year-on-year, with a notable 37 percent increase in the fourth quarter. According to research notes from various brokerage houses, these expenses were exacerbated by well-intervention activities and increased field expenditures in key locations. Exploration costs also decreased significantly, dropping by 12 percent in FY24. Additionally, other income saw a marginal one percent increase.

PPL announced a final cash dividend of Rs2.50 per share, bringing the total dividend payout for FY24 to Rs6.00 per share, corresponding to a payout ratio of 14 percent, compared to the previous year’s ratio of 7 percent.

Looking ahead, PPL is expected to benefit from ongoing energy sector reforms, which are anticipated to improve trade debt flows and enable the company to intensify its exploration activities. This, in turn, could help address its declining reserve base. Analysts maintain an optimistic outlook for PPL, projecting a robust recovery in the coming years as the company continues to manage its operational and financial challenges.