KARACHI, Oct 19: On Tuesday, Pakistan Oilfields Limited (POL) announced results for the first quarter ended September 30 (Q105). The company logged in profit after tax amounting to Rs660 million, which was lower than generally expected net profit , which, most of the market thought, would settle at above Rs700 million.
The net profit for the quarter represented 8 per cent drop from taxed profit at Rs717 million posted by the company in the corresponding quarter of the previous year.
The Board, which met in Rawalpindi on Monday, did not recommend any interim dividend- and none was expected. The share in POL rose by Rs2 to close at Rs205.55 ex-dividend on Tuesday. But that had less to do with the company's Q105 results and more to the overall recovery of the market. POL, on Tuesday, recovered a part of the loss of Rs12 suffered in the previous few sessions. Earning per share (eps) for Q105 worked out at Rs5.02, which on the current market value, produced the price-to-earnings (p/e) ratio of 10x on annualised basis. The stock offers 7 per cent dividend yield.
Net sales for Q105 improved 10.6 per cent to Rs1,810 million, from Rs1,636 million in the same period of the previous year. Exploration costs were up 13 times to Rs270 million, from Rs20 million in the previous similar period. Tanvir Abid, head of research at Jahangir Siddiqui Capital Markets Limited (JSCML) mentioned that POL would perhaps be the greatest beneficiary of soaring oil prices as crude oil sales of the company accounted for 51 per cent of the overall company sales (FY'04 figures).
The analyst pointed out that international petroleum prices had witnessed a steep rise during last year and following over into the Q105. "International benchmark crude oil prices have rocketed to all-time highs of around $55 a barrel, averaging 45 per cent higher to $44 per barrel during Q105 compared to $30 during the corresponding period of last year," JSCML analyst said.
Murad Ansari, analyst at KASB Securities agreed that unlike the other two listed upstream oil and gas companies (PPL and OGDC); POL derives a higher share of its revenues from the oil business. In FY'04, though the company derived 51 per cent of its revenues from oil, gas accounted for a lesser 22 per cent of revenues.
"In Pakistan, oil prices are revised on an almost monthly basis, while gas price revision is done on a semi-annual basis," said the KASB analyst, adding that POL was expected to be a major beneficiary of the high oil prices, as the impact would flow to it much more quickly than the other two listed oil and gas companies. The analyst had calculated exploration costs to jump 10 times from Rs20 million in 1QFY04 to Rs200 million in the first three months of the year under review.
Shahab Farooq at First Capital Equities said in a results preview that the pressure on bottom line was likely to be a result of increased operating costs due to higher amortization expenses and normalised exploration costs. The analyst expected to see a decline in production volumes owing to natural decline in production levels of POL-owned fields, which contributed around 35 per cent to the sales volumes of both oil and gas, but he visualised 9 per cent growth in net sales during Q105 owing to record high international oil prices. Going forward, POL was thought to post growth in its earnings owing not only to scaling oil prices but also due to commencement of Tal Block, which was expected to start production from 1Q05.
Sarwat Fatima, analyst at Elixir Securities Pakistan had forecast POL's Q105 earnings at Rs 657 million, which was perhaps closest to the actual Rs660 million. However, the analyst's detailed report on the company results was not immediately available.
Mohsin Ahsan, analyst at Global Securities recollected the POL performance in FY'04, observing that the company's earnings had improved by 2.7pc mainly on the back of increase in oil prices as production was down 9.3pc during FY04. The analyst also mentioned the upward momentum of oil prices and admitted that POL being an oil producer was gaining the most among the three exploration companies. POL had increased its exploration activity to replenish reserves and to improve production levels which had been declining in last two years. During FY04, exploration costs had increased 64pc to Rs804m. Large gas reserves were discovered in 'Tal' block, in which POL held 25 per cent stake. The field was likely to go into operation from the current year.