Earnings Report /
Pakistan

Pakistan Oilfields: 1QFY23 Review - Highest ever quarter exploration costs slams earnings potential

  • POL posted 1Q EPS of PKR 29.59 as high oil prices and PKR devaluation continued to add revenue gains

  • 1Q result could have been higher, had it not been for all-time high astronomical exploration costs of PKR4.5bn

  • We reiterate our liking for POL as its expected DY of 21% for FY23e is relatively shielded from circular debt

Intermarket Securities
25 October 2022

POL reported 1QFY23 earnings of PKR 8.4bn (EPS: PKR 29.59), similar to the previous quarter but 60% higher than last year. The earnings could have been potentially higher had it not been for the astronomical exploration cost of PKR4.5bn (previous high of PKR2.8bn during 2QFY15).

Key highlights:

  • Net sales jumped 44% YoY to PKR 16.0bn during 1Q as high oil prices and PKR devaluation continued adding towards topline gains.

  • Operating cost declined 16% QoQ as most workover jobs were carried out in the last quarter.

  • The exploration costs have swelled astronomically to PKR4.5bn, highest ever reported by the company. The last high was PKR2.8bn for the quarter ending Dec’14. Most of it could likely be linked to Jhandial exploration efforts as well as dry well cost. We await detailed accounts for clarity in this regard.

  • The company continues to enjoy Fx gains and interest income which was reported at PKR6.6bn. Other income continues to stand sufficient in cushioning hefty spikes in exploration expenses.

  • Effective tax rate for the quarter stands at 18% as compared to 25% in the previous quarter.

Despite asset concentration risk, POL boasts a healthy reserve life of c.18 years and we reiterate our liking for its healthy payout stream and cash rich balance sheet that is relatively shielded from circular debt accumulation. We believe, despite ongoing expensive exploration efforts to increase output, the scrip offers a high dividend yield of 21%. We have a BUY stance on POL based on our TP of PKR 497.0/share.