KARACHI, Jan 25: State-run Pakistan Petroleum Ltd. (PPL) posted a better-than-expected 46 per cent rise in first-half net profit, fuelled by higher natural gas prices, sending its share’s price up five per cent.

Analysts, however, doubt that PPL, which operates the country’s largest gas field at Sui in Balochistan, can keep up that kind of earnings growth as its Sui reserves are dwindling, it has few new discoveries and it faces an end to guaranteed gas price rises.

"In coming years, PPL will not be able to sustain its earnings momentum as the guaranteed upwards gas price revision will end, while its reserves at Sui are also depleting," said Ali Hussain, head of research at Invest Capital and Securities.July-December net profit jumped to Rs8.45 billion from Rs5.78 billion a year earlier and beat market forecasts for Rs7.7-7.9 billion.

Mohammad Fawad Khan, analyst at KASB Securities, said the result was a "positive surprise" for the local market. "Going forward, market sentiment will improve further on expectations of more strong earnings in coming weeks," he said.

PPL, which accounts for 26 per cent of Pakistan's gas production and which is high on the government's privatisation agenda, said six-month sales rose 24 per cent to Rs17.78 billion from a previous Rs14.34 billion.

“PPL is the most undervalued stock in the exploration and production sector, and we expect full-year earnings per share to be above Rs26.17, as gas prices will be revised again,” said Naveed Vakil, analyst at AKD Securities.

PPL shares, valued at $2.8 billion, trade at just under 10 times forecast earnings, against 10.5 times for India's Oil and Natural Gas Corp. Ltd. and an Asia-Pacific sector average of more than 29 times.

Gas prices paid by distributors in Pakistan - Sui Northern Gas Pipelines Ltd. and Sui Southern Gas Co.Ltd. - are revised each January and July.

Under a government-regulated wellhead pricing formula, prices paid by distributors to PPL from the two main Sui and Kandkhot fields rose 12.5 per cent in the fiscal first half.

The government guarantees a 26 per cent annual increase in gas prices from Sui and Kandkhot, and prices are due to be revised again later this month.

PPL share closed up five per cent at a near 3-month high of Rs260.90 in a broader market up by 1.6 per cent.PPL will pay Rs4.5 per share interim dividend.—Reuters