The cumulative oil production of the four listed oil and gas exploration and production (E&P) companies (OGDC, POL, PPL and MARI) is expected to reach 52,000 barrels per day (bpd), depicting growth of impressive seven percent on year-on-year basis during the first quarter of current fiscal year FY13. However, during the same period total oil production of the sector stood at 70bpd, up by remarkable 10 percent on year-on-year basis.
"Faltering oil production by POL can be blamed to slow down the production growth of our sample, as production of the black gold by the mentioned company is foreseen to contract by worrisome 10 percent on year-on-year basis in the first quarter of FY13," Asad Siddiqui, an analyst at InvestCap said. The major brunt of diminishing production came from the company's own operated fields including Domial, Pindori and Pariwali, he added.
He said the first quarter of the current fiscal (FY13) could be classified as a fruitful period for the Oil & Gas Exploration and Production (E&P) sector of the country. Superior performance was not only limited to the production of the sector but was evident in the profitability as well, he said. The gas production of the sample companies is expected to witness fortunes that are complete opposite of the oil production of the sector. "During the period under review, we foresee the sector's gas production to clock in at 4.2k mmcfd (up two percent on year-on-year) against our sample's estimated production of 2.2k mmcfd, where the production of our sample expanded at a velocity of 3pps higher than the whole sector," he said.
The prime contributor remained OGDC, as the gas production of the E&P giant is estimated to be up by 16 percent on year-on-year with handsome 21 percent estimated increase in the production of gas from the company operated fields. He said crude oil prices (Arab light) averaged out at 107 dollars per barrel during the period under review against 108 dollars per barrel during the corresponding period previous year.
Banking on the above mentioned volumetric expansion coupled with decrease of nine percent on year-on-year in the worth of PKR against USD, topline of the sample companies was strengthened by 14 percent on year-on-year basis. However, gross margins were seen to fade off by 1pps, all thanks to higher operating costs of the sector, which as per barrel of oil equivalent (BOE) estimates was recorded at 3.51 dollars per barrel (up 16 percent on year-on-year basis.
Exuberant surge of 127 percent in the exploration cost was responsible to squeeze the operating margins of the sample companies by 2pps. However, faltering operating margins were to some extent contained by healthy increase of 20 percent that was experienced under the other income head.
PPL was the major contributor in the mentioned head as its other income expanded by 44 percent (Rs 694 million in monetary terms). As a result fall in the net margins of the sector was curtailed to 1pps as the bottom-line inflated by notable 10 percent on year-on-year basis during the period under review.
Going forward, he said, resumption of normal supply from POL's own operated fields coupled with further rupee depreciation is going to bode well for the E&P sector. "We foresee the international oil prices to remain on the higher side during the coming months with demand coming in from USA as the country is building up its inventory levels (crude oil) post the devastation that was left behind by the hurricane Sandy," he added.
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