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 joint 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
During the period under review, the E&P Company's oil production suffered a fall of around 4.6 percent year-on-year. Crude oil production for POL stood at 1,226 thousand barrels for 9MFY13. Similarly, gas production could also not emerge from the continuously shrinking flows, and the production glitch resulted in a contraction of over 16 percent for 9MFY13. Compared to 24 billion cubic feet during 9MFY12, the gas production during 9MFY13 was 20.5 billion cubic feet. The firm also witnessed a shrink of 14 percent year on year in production from its LPG producing fields. The LPG production for 9MFY13 stood at 17,390 metric tons compared to 20,314 metric tons averaged during 9MFY12.
9MFY13 profitability hit by production woes
It does not settle well when oil and gas production by an exploration and production (E&P) company continues to go down. And unstiffening of production at Pakistan Oilfields Limited (POL) has kept a lid on the company's share price, which has disappointed the benchmark index over the last six months.
The country's third largest E&P Company 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 as well as extravagant rise in exploration costs.
Pakistan Oilfields Limited continued to face rough times in production during the nine months of the fiscal year 2013. The chief reason behind production slippages was the same: subdued flows from POL's own operating fields. POL's performance during 9MFY13 deviated from the sector's profitability formula during 1HFY13: a combination of higher oil production, and an eight percent year-on-year rupee depreciation versus the dollar.
Though some expectations of a rebound in oil production were making rounds, production figures revealed in the company's accounts show that oil slipped by more than four percent year-on-year. Also natural gas production continued its downward trend, contracting by 16 percent year-on-year.
The unattractive combination of lower volumetric flows and lower realised crude oil prices axed the company's top line by 2.5 percent year-on-year. Arab light crude oil prices hovered at $109 per barrel for the period, marginally down by two percent over similar period last year.
POL's profits for the nine months of FY13 declined by 7.6 percent, year-on-year. Besides the slowdown in hydrocarbon production, noticeable increase seismic costs and lower dividend income from associate companies (National Refinery and Attock Petroleum) affected the earnings adversely.
Liquidity With current ratio improving and no debt on its balance sheet, the company has no long-term solvency and liquidity issues. However, during FY13 so far the company has witnessed a sharp fall in the payouts and dividends from associated companies. This has been partly due to the Attock group's growth plans of acquiring Chevron's assets in the country.
Outlook After consecutive dull performances during the three quarters of FY13, POL has some realistic and strong volumetric growth expectations for FY14 and onwards. On the bright side, the production commencement from Mamikhel and Maramzai is expected to join production.
Further development and appraisal plans, which might result in significant discoveries, will be sufficient to shore up company's earnings and share price. Pariwali well is under production testing, while Manzalai has reached target depth. Other well like Makori East are also expected to hit the target depth soon. Though chances are meager, increase in the international oil prices in future would positively impact the E&P sector profitability especially with improved gas well head prices for new blocks under the new petroleum policy.
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Pakistan Oilfields Limited (POL)
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9MFY11 9MFY12 9MFY13
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Profitability
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Gross margins 62.4% 62.1% 57.7%
Net margins 43.2% 42.9% 40.3%
ROE 25.7% 28.8% 28.0%
ROA 17.7% 18.2% 16.8%
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Liquidity
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Current ratio 2.48 2.05 1.92
Total liabilities to total assts 0.31 0.37 0.40
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Efficiency
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Fixed asset turnover 0.99 1.05 0.85
Total asset turnover 0.41 0.43 0.42
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Market
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EPS(Rs/share) 33.14 39.44 36.46
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