KARACHI, Jan 8: Energy sector stocks listed on the KSE produced a decent return of 27 per cent during the calendar year 2004. The sector broadly includes all listed oil and gas marketing companies, refinery, Exploration and production (E&P) and power generating companies.

Analyst Abdul Rasheed at InvestCap said that the local refinery sector posted 74 per cent return in 2004, and thus was best performing in the energy sector during 2004, among the three E&P stocks listed on the local bourse, OGDC's stock remained best performing with 44 per cent return during the period. Pakistan Petroleum Limited (PPL) share price increased by 24 per cent since its listing on the stock exchange in July that year.

In another report released on Wednesday, Muhammad Owais, head of research at First National Equities Limited disclosed that OGDC had achieved another milestone production mark of 1bcf per day in HY'05 (Jul'04-Dec'04). "Simultaneously, the company also gained the largest gas producer status in HY'05 by overtaking PPL", said the analyst, adding that PPL's production remained stagnant due to the rapid depletion of its backbone Sui field. "It is important to remember that OGDC already got the largest oil producer status in FY'04 by overtaking British Petroleum (Pakistan)", reminded Owais.

Abdul Rasheed at InvestCap observed that though the energy sector had overall produced decent returns, power sector return during the year was negative 9 per cent. He explained that most of the listed power sector companies operate under fixed return policy. And in the current rising interest rate environment dividend yields on those companies were less attractive to the investors. Besides, market assumption of zero operational risk in the sector also came under question as some companies were unable to meet the investor dividend expectations due to operational problems. Oil and gas marketing sector posted a return of 11 per cent during the year.

As regards the outlook for the current year, the analyst said that excluding the Sui twins and power companies, the profitability of all other energy companies was more or less linked with global oil prices. "In 2005, E&P and OMC stocks will also remain in focus due to the volumetric growth in these sectors" stated Rasheed. It was yet to be seen how Kapco's IPO planned for the current month would affect the energy sector and the overall market.