Pakistan: E&P companies post windfall profit

According to a report by Pakistan’s leading brokerage house, AKD Securities, the Exploration & Production (E&P) sector has reported phenomenal earnings for 1QFY23. The sector’s profit after tax was reported at PKR100.8 billion—the highest in its history. 

The sector’s earnings grew 55%YoY, with favorable macros driving earnings growth this quarter.  Net sales were reported at PKR226.6 billion for the quarter, higher by 13%QoQ and 54%YoY. This despite a drop in Oil/Gas production, but a weak PKR fueled topline growth. 

Exploration expenses in the final quarter of last year were at PKR26.6 billion, with the giant’s share dropping in PPL’s lap, with the Company reporting PKR11 billion in dry well costs. In 1QFY23, the exploration expenses of the sector were stated at PKR9.2 billion, lower by 65%QoQ, due to the absence of any substantial dry wells. 

On a company wise basis, the greatest sequential growth in profitability was posted by PPL, with net profit growing rising to PKR26.3 billion for the quarter. Trade Debts of OGDC and PPL were reported at PKR491 billion and PKR401 billion at the end of the quarter, respectively, increasing by PKR34 billion and PKR35 billion from the earlier quarter. 

The E&P sector provides investors with an exchange rate hedge, with the prospects of the sector having been muddied by mounting trade debts for the larger companies. Hence, within the sector, analysts like MARI and POL due to the relatively low exposure to the circular debt menace.