Pakistan's third largest oil and gas exploration and production company, Pakistan Oilfields Limited (POL) is a subsidiary of Attock Oil Company of the Attock Group. It is primarily engaged in exploration and production of hydrocarbons in the country since 1950s. It overtook the E&P business of AOC in the 1970s. Since then it has been autonomously investing and entering into joint venture partnerships with various local and foreign E&P firms like Attock Oil Company, MOL, Tullow, OGDC, PPL, and GHPL.
Aside from the firm's main business activity of oil and gas production, POL also produces solvent oil, sulphur, and manufactures and markets liquefied petroleum gas under the brand name POLGAS. Pakistan Oilfields Limited sells LPG through its stake in its subsidiary named CAPGAS (Private) Limited. The subsidiary is not only engaged in storage, filling and distribution of LPG but also receives LPG from Adhi field operated by Pakistan Petroleum Limited and Pak Arab Refinery (PARCO). Its distribution centres are located in Khyber Pakhtunkhwa, Punjab, Azad Kashmir and Balochistan. POL also has a network of pipelines for the transportation of crude oil to the Group's Attock Refinery Limited.
FINANCIAL AND OPERATIONAL PERFORMANCE FY14 POL's performance in FY14 remained satisfactory. The firm's profit were highest ever in its history, which was mainly on account of higher production of crude oil that increased by 26.5 percent in comparison to last year. Rise in crude oil production came primarily from Makori East, Maramzai and Mamikhel fields which offset decline in production from Manzalai and Makori fields.
A significant rise of 26.5 percent year-on-year also occurred in POL's LPG production due to the start of production from Makori Gas Plan Facility. Gas flows too, increased, albeit at a steadier pace of around 4.5 percent year on year, in FY14. Pakistan Oilfields Limited's revenue mix is tilted towards oil: crude oil constitutes 60 percent of the revenues, while natural gas accounts for 25 percent of the total sales. Firm's POLGAS (LPG) makes up 14 percent of the total revenues, while the remaining one percent is held by other products like sulphur and solvent oils.
The firm's profitability also showed the effects of higher amortisation of development costs, royalty expense, operating costs and depreciation, which in turn led to a slippage in POL's gross margins from 56.3 percent in FY13 to 53.5 percent in FY14.
POL's bottom line jumped by 18 percent, year-on-year in FY14 and the net margins remained constant especially after the decrease in gross margins due to rupee depreciation and exploration costs. Exploration cost slightly reduced, as there were no major disappointments of dry wells during the period, largely due to the fact that drilling activities were subdued.
FINANCIAL AND OPERATIONAL PERFORMANCE 1QFY15 Amid sliding crude oil prices in the international market, POL remained robust in the first three months of FY15. While it was expected that the E&P firm's top line would remain at least stagnant, POL's revenues jumped by 11 percent year-on-year primarily on account of higher crude oil and LPG production.
Crude oil and LPG production increased by 14.52 percent and 87.20 percent year-on-year, respectively in 1QFY15 mainly from the famous TAL Block. The firm was able to improve gross margins tremendously by more than four percentage points in 1QFY15 vis-à-vis 1QFY14. Similarly, net margins also increased due to better top line, and a 29 percent reduction in amortization costs. The main damper to the POL's earnings was a hefty fall in other income, which primarily came from the no dividend income from its associate firm National Refinery Limited. While the production prospects for the firm remain bright with Tal block being the impetus in the current oil flow, the key to FY15 earnings lies in what happens to the crude oil prices.
OUTLOOK Exploratory activities in the E&P sector has gain momentum in the past couple of years. With the award of 60 new licenses last year and record level seismic data acquisition, the E&P production activities have not been tepid.
However, the sliding oil prices threaten the returns of oil and gas exploration and production, should the trend continues. The E&P sector should brace for decreased earnings in the upcoming financial results for 1HFY15 where crude oil prices have more than halved during this period.
For Pakistan Oilfields Limited too, the profitability hinges on international crude oil price rebound, which is nowhere nearby at the moment. On the recoverable reserves front, Makori East fields have been upgraded while some oil reserves have reported decline.
Where the financials appear quite strong, POL's gross margins will continue to remain under the weather, as rupee seems to have stabled and oil prices have not shown upward movement of late.
=================================================================
Pakistan Oilfields Limited
=================================================================
FY12 FY13 FY14
=================================================================
Profitability Ratios
-----------------------------------------------------------------
Gross margin % 61.16 56.31 53.49
Net margin % 41.43 37.5 36.26
ROE % 33.73 32.86 36.61
ROCE % 34.65 31.8 37.82
-----------------------------------------------------------------
Liquidity Ratios
-----------------------------------------------------------------
Current ratio times 3.13 2.09 2.53
Quick ratio times 2.61 1.61 2.04
Cash to current liabilities times 2.05 0.91 1.30
-----------------------------------------------------------------
Activity/Turnover Ratios
-----------------------------------------------------------------
Debtors turnover times 7.79 7.33 7.13
Total assets turnover times 0.58 0.55 0.64
Fixed assets turnover times 1.35 1.15 1.30
-----------------------------------------------------------------
Investment/Market Ratios
-----------------------------------------------------------------
EPS Rs 50.13 45.78 54.48
P/E ratio times 7.32 10.87 54.48
Dividend yield % 14.46 10.41 9.80
Dividend payout % 104.72 98.31 96.37
=================================================================
Source: Company accounts
Comments
Comments are closed.