One of Pakistan’s pioneer exploration and production (E&P) Pakistan Petroleum Limited (PPL) is scheduled to announce its FY16 financial results on 17th January 2017. During this period global crude oil price hovered at low levels. Therefore, the investors/shareholders await the result anxiously.
Pakistan’s leading brokerage house, AKD Securities has released its forecast hinting towards a decline in Earnings per Share (EPS) by 40 percent. The brokerage house attributes this potential decline to 44 percent decline in international oil prices. It has also hinted towards some other positives.
According to the brokerage house, PPL profit after tax for the period under revive is estimated to decline to Rs20.40 billion (EPS: Rs10.35) as compared to net profit of Rs34.25 billion (EPS: Rs17.37) for a year ago, a plunge of 40 percent.
Brokerage house has attributed this decline primarily to a 44 percent decline in average international crude oil price of USD41/barrel in FY16 as compared to USD73/barrel during FY15.
The report also suggests that PPL may also announce a final cash dividend of Rs2.75/share that would the full year payout to Rs5.00/share for FY16.
The story would begin with an expected fall in topline by 24 percent, to Rs79.13 billion in FY16 from Rs104.02 billion in FY15. Other income is expected to decline by 30 percent to Rs5.32 billion owing to decline in short-term investments. Finance cost is expected to go up by 24 percent to Rs688 million owing to greater real discount rate set for the decommissioning obligations.
A decline in royalty expenses is likely to provide some relief. However, slide in crude oil price remains a key risk to declining revenues/earnings and consequently valuations.