The oil and gas exploration and production companies had good earnings growth in FY22 due to the depreciation currency and then later – rising crude oil prices. Pakistan Oilfields Limited (PSX: POL) witnessed almost double increase in earnings while Oil and Gas Development Company Limited (PSX: OGDC) reported over 46 percent growth in its bottom line. The E&P companies continued to benefit from falling currency during 1QFY23 with growth in earnings at 60percent and over 58 percent year-on-year for POL and OGDC, respectively.

OGDC’s revenues increased by 48 percent year-on-year in 1QFY23 which was due to 43 percent year-on-year surge in oil prices, and domestic currency depreciation of 26 percent year-on-year. Average realized prices of crude oil and natural gas increased by 62 percent and 14 percent year-on-year, respectively. POL’s revenue growth was around 44 percent, year-on-year in 1QFY23 also due to higher crude oil prices and currency depreciation. Both the E&P companies on the production front continued to see dip in oil and gas production, which stood at around 10 percent and 9 percent for 1QFY23 for OGDC as well as POL.

OGDCL witnessed a 32 percent year-on-year decline in exploration and prospecting expenditure due to the absence of a dry well during the quarter versus 1QFY22. Meanwhile, POL’s exploration and prospecting expenditure increase massively by 10 times most likely due to dry well during the quarter versus none in similar period last year

Apart from the rise in topline, the growth in OGDC’s and POL’s bottomline was also due to increase in other income coming from hefty exchange gains from currency depreciation. For OGDC, other income in 1QFY23 was up significantly by 70 percent year-on-year, due to exchange gain on foreign currency coupled with higher income from cash and cash balances. For POL, The other income showcased a two times increase.

1QFY23 performance for the two E&P firms was primarily driven by higher oil prices and currency depreciation – both indicators of volatility. Meanwhile, what is a key concern the E&P companies is the falling production levels of both oil and gas. Depleting reserves and small discoveries have been a highlight of the E&P production landscape for a long time with no respite being witnessed.