Pakistan Oil Fields has reported a sharp drop in first quarter net profits for the second quarter in a row as its topline remained under pressure due to decline in both production and realised oil and gas wellhead prices.
The company's oil production fell 11 percent on year-on-year basis, whereas its gas production went down by 12 percent during the period. The problem mainly stemmed from subdued contribution from its biggest oil field Pindori where the water-cut problem led to a massive 53 percent decline in production. Output from the firm's second largest field Pariwali oil production also declined by 18 percent during the period.
On top of that, the 41 percent year-on-year decline in Arab Light oil price trimmed its revenues even further. Average gas wellhead prices also slid 22 percent during the period - reflecting average oil price of $47/bbl - dragging the net selling price lower by 37 percent.
The fall in topline, however, was arrested by the depreciating rupee; the currency weakened by 12 percent in 1QFY10 on year-on-year basis - mitigating the impact of falling oil and gas prices - which went down by an average 27 percent in rupee terms. But the currency's stability during the quarter helped the firm reduce its financial charges threefold as the exchange loss on portioning of decommission cost was a mere 2 percent.
Going forward, POL's production woes seem to be coming to an end as recent data shows considerable recovery in Pindori - its worst hit field. The field's production averaged 1900 bpd during 1QFY10, up from miserable average of 235 bpd in 4QFY09. And with drilling work currently in process, the firm is expected to boast better production volumes in latter half of the year.
POL is likely to get further impetus from the upcoming production in Manzalai fields, expected to commence between October and December 2009. Furthermore, the firm has four exploratory wells under drilling process - all in areas of strong prospects, which could act as a catalyst to its production in latter half of the year. With a strong balance sheet, resolved circular debt issue and stable oil price expected growth; the firm seems poised to outplay its peers.
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POL P&L
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Rs (mn) 1QFY10 1QFY09 % chg
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Sales 3,176 4,871 -35%
Cost of sales 1,293 1,498 -14%
Gross profit 1,883 3,373 -44%
Gross margins % 59% 69% -14%
Finance cost 99 322 -69%
Other income 285 298 -4%
Exploration costs 53 254 -79%
PAT 1,426 2,261 -37%
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EPS (Rs) 6.03 9.56 -37%
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