KARACHI, March 3: The Board of Directors of Pakistan Oilfields Limited sat last week to approve financial results for the six months ended December 31, 2003.

POL being an active stock, analysts, traders and speculators were throwing around net profit figures and possible payout that would likely be announced. The greater interest was naturally in the latter.

For the corresponding period last year, the company had disbursed interim cash dividend at Rs10 per share and it was to be seen if the board would stick to that.

The biggest bets were on a payout ranging between Rs6 to Rs7 per share, slightly lower than last year, because of increase in number of outstanding shares as a result of bonus issue at 60 per cent in June 2003.

The basic earning per share (eps) was first announced, which was a healthy Rs9.40. The price of the share in POL shot up to around Rs207. Then the shareholders in POL skipped a few heart beats as the company announced that it was skipping the interim dividend.

It was quite unexpected for the company had been paying interim cash dividends for all of the preceding years since 1997; the company had omitted an interim payout just once in 1999. Most investors were sour since they thought that the company had a healthy cash flow and omission of the interim looked a little "strange".

The news naturally was greeted with a cool investor response and the share in the company closed at its lower circuit breaker of Rs201.50. Arguably, the huge plunge of 111 points in KSE-100 index-the greatest fall this year-witnessed that day, was precipitated by the POL announcement.

The price in POL share plunged by over Rs13 in the first two days following the announcement, but the stock has since recovered to Rs204.40. Several analysts were willing to set the interim results and omission of the interim cash dividend aside, as the company's strategy to save cash for company's investment in Exploration and Development (E&D) activity.

The company posted after-tax profit of Rs1,246 million, representing decline of 5.64 per cent over the taxed profit of Rs1,321 million in the corresponding period of the previous year. Net sales revenue of the company had increased by 6.94 per cent to Rs3,325 million, from Rs3,238 million, as the oil prices were on the higher side during the period under review.

During the period, production from oil and gas field "Meyal" remained suspended for three weeks. Since "Meyal" is 100 per cent owned by POL, there was likely to have been some production loss.

The benefit of increased revenue, however, could not travel down to the bottomline due to 50 per cent increase in royalty payments to Rs378 million, from Rs253 million; 13 per cent rise in exploration costs to Rs329 million from Rs291 million and a 107 per cent rise in amortisation of exploration and development costs to Rs179.3 million, from Rs86.7 million.

Recently, new oil and gas reserves were found at POL's own operated Pindori development and production field located near Islamabad (As on June 2002, POL held a 35 per cent working interest in the field).

The Pindori field was supposed to be contributing 42 per cent of the company's oil production and 18 per cent of its gas output. The discovery at Pindori follows on the heels of a huge gas discovery in Tal Block. But the Tal Block was unlikely to make much of a positive impact on the company before the later half of financial year 2005.

The price of locally explored crude oil is linked with global oil prices, according to the Exploration Policy. The gas production from Pindori fields would also have been indirectly linked with international crude oil prices.

The global oil prices had recently surged to post-Iraq war high at $36.7 per barrel in New York and $33.05 per barrel in London. An advantage that POL enjoys is the low financial costs since on- going exploration activities had been financed through internal funding. And it was this "strong cash position", which had surprised shareholders that the company had decided to skip the interim dividend.