As a subsidiary of Attock Oil Company Limited, Pakistan Oilfield Limited is primarily an exploration and production company which was incorporated back in 1950s. It overtook the exploration and production business of AOC in the seventies. Since then it has been independently investing and entering into join venture partnerships with various local and foreign E&P companies like Attock Oil Company, MOL, Tullow, OGDC, PPL, and GHPL.
The main business activity of the company remains exploration and production. Besides E&P business, the company produces solvent oil, sulphur, and manufactures and markets liquefied petroleum gas. Under the brand name POLGAS, Pakistan Oilfields Limited sells LPG through its 51 percent 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 PPL and Parco. The distribution centres are located in Punjab, Khyber Pakhtunkhwa, Azad Kashmir and Balochistan. POL also has a network of pipelines for the transportation of crude oil to the group's Attock Refinery Limited
OPERATIONAL PERFORMANCE FY12 The company plays a significant role in the domestic oil and gas sector; during FY12, Pakistan Oilfields Limited contributed an amount of around Rs 11 billion in shape of royalty and government levies. On the exploration and drilling front, POL achieved success in Makori East II and Bela I amongst a few others, during FY12. However in terms of drilling out the hydrocarbons, the production statistics were dry during FY12. The company's production from its own fields and partner operated stood stagnant during FY12 with average production share of 4,593 barrels per day.
Similarly, the production of natural gas was a mere 1.4 percent increase YoY during the said period with average daily production of 87.56 mmcf.
The boost to productivity and profitability actually came from the oil prices: The E&P players in the country were seen to benefit from the higher oil prices internationally through most part of the fiscal year FY12 as evident from the rise of 18 to 19 percent year on year in average price of Arab Light to $84.91 per barrel.
PROFITABILITY FY12 - SLOWER BUT STEADY The international oil prices were the only contributor to the 15 percent augmentation in the top line to Rs 28.6 billion during FY12 versus FY11 as volumes of Pakistan Oilfields Limited chose to be flattish during the said period due to delays and slippages.
However, some improvement from the company's non operating block Tal managed to lift some hopes, and according to the analyst at Top Line Securities, this pushed up oil and gas production by approximately three percent and two percent YOY respectively.
On a segmental basis, the largest increase was in the receipts from oil which rose by 22 percent YoY to Rs 14 billion and contributed to almost 50 percent of the total revenues. Gas sales which were around 30 percent of the total revenues during FY12 grew by eight percent over similar period last year. The third big contributor to the top line was marketing of liquefied petroleum gas under the brand name Polgas.
Compared to the stupendous growth in the earnings of the peer E&P companies, the bottom line of Pakistan Oilfields Limited during FY12 grew by a slower 10 percent versus that of FY11. Besides the sales revenue, the expansion is attributable to little or no exploration write-offs.
Also, the earnings were steady during FY12 due to the stable cash position and higher other income, primarily in form of higher dividends announced by the associate companies of Attock Group. However, what deterred earnings from expanding on a faster pace during the period under review is the high amortisation of development and decommissioning cost particularly at Domial. The gross and net margin also dipped by 200 basis points each.
Furthermore, the net earnings of the E&P Company were diluted due to relatively higher taxation and a noteworthy fall in the oil prices unmistakably during the 4QFY12.
BEGINNING OF FY13 Where Pakistan Oilfields Limited drew the curtain to an exclusive FY12 for the upstream sector, it commenced the first quarter of FY13 for the E&P sector in quite a dreary manner.
The chief reason for the hitch in the revenue growth came from subdued production flows primarily from the company's own operating fields. Top line receded by nine percent YoY during 1QFY13 due to weaker oil production. At the same time, gas flows during the first quarter of FY13 were also strained. Further, the bottom line of the company shrunk by chunky 18 percent YoY during the quarter ended September 30, due to increased seismic activity and no declaration of dry wells. This translated into an extravagant rise in exploration costs.
OUTLOOK The company declared a final cash dividend of Rs 35 per share making the total dividend Rs 52.5 for FY12. Going forward, with ambitious exploration and drilling activities planned during FY13, the company has an immense potential of an up tick in production as well as reserves. Production particularly from Makori East - I is expected to impact POL's production positively during FY13.
Though FY13 has commenced rather slowly, the brighter side is that this is just the beginning. In accordance with the drilling and production plans, exploration and production sector is anticipated to swell during FY13 largely through volume accretion.
Moreover, it is too soon to interpret the fate of the company during FY13. With positive hopes from Bela and Makori East I, good news about its other fields like Makori East II and Tal block during FY13 have greater chances of turning tables for Pakistan Oilfields Limited.
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Pakistan Oilfields Limited
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FY10 FY11 FY12
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Profitability
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Gross margin % 61.00 62.63 61.16
Net margin % 41.68 43.34 41.41
ROE % 25.53 32.36 33.60
ROCE % 27.01 34.58 34.51
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Liquidity
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Current ratio Time 3.69 3.27 3.19
Quick ratio Time 2.83 2.73 2.66
Cash to current liabilities Time 1.90 1.83 2.08
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Activity/Turnover
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Debtors turnover Time 8.09 7.20 7.79
Total assets turnover Time 0.48 0.58 0.58
Fixed assets turnover Time 1.10 1.35 1.35
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Investment
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EPS Rs 31.44 45.72 50.11
P/E ratio Time 6.87 7.85 7.32
Dividend yield % 14.10 12.18 14.46
Dividend payout % 81.11 76.55 104.78
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