Earnings Report /

Pakistan Oilfields: FY22 review – FX gains help overcome super tax burden

  • POL announced highest ever earnings of PKR91.4/sh in FY22 as oil prices and PKR devaluation continued to bode well

  • High FX gains during the year kept the impact of super tax modest, also enabling a healthy payout of PKR50/sh

  • FY22’s low payout rate of 77% against c.95% historical average points at allocation towards exploration

Intermarket Securities
16 August 2022

POL announced highest ever annual earnings of PKR 25.9bn (EPS: PKR 91.37) for FY22 as higher oil prices and PKR devaluation continued to impact positively. The 4Q earnings are also at an all-time high of PKR 8.44bn (EPS: PKR 29.73). High Fx income gains during the quarter kept the effective tax rate at a modest level during the year, where ETR dropped to 30% from 35% last year. The company announced final DPS of PKR 50, in-line with our estimates, taking total payout of FY22 to PKR70/share.

Key highlights:

  • Net sales for the year clocked in at PKR 52.0bn, up 42% YoY as realized oil prices jumped 64% higher to USD84/bbl and realized gas prices averaged at PKR3.06/mmbtu (+5% YoY). This is despite a decline of c.10% each in oil and gas output during the year.

  • Operating costs jumped 4% YoY during the year, albeit at a slower pace than currency devaluation.

  • Slower exploration efforts by POL continue to keep exploration costs low; however, they have grown by 65% from last year.

  • Major deviation to our estimates stemmed from higher other income which continued to grow from Fx gains POL continued to increase investment in FCY deposits during the year.

  • Effective tax rate for the year clocked in at 30% against our estimate of 35% as the Fx gains continued to cushion the tax burden.

Despite asset concentration risk and a low reserve life of less than 3 years, we like POL for its healthy payout stream and its balance sheet being relatively shielded from circular debt. Even though DPS of PKR 70/sh in FY22 was the highest ever, it is still at a lower payout rate of 77% as against c.95% historical average. This points towards allocation of funds towards the ongoing exploration efforts in various blocks. We continue to like POL as it offers a 12-month dividend yield of 17%. Buy.