Karachi, November 07, 2022 (PPI-OT): Pakistan Oil and Gas: E and Ps post phenomenal start to the year

The Exploration and Production sector reported phenomenal earnings for 1QFY23, with the sector’s NPAT clocking in at PkR100.8bn – the highest in its history. The sector’s earnings grew by 1.6xQoQ and 55%YoY, with favourable macros driving earnings growth this quarter.

Net sales clocked in at PkR226.6bn for the quarter, higher by 54%YoY/13%QoQ, despite a drop in Oil/Gas production of 10%/2%YoY, respectively, with a weak PkR driving topline growth.

Exploration expenses in the final quarter of last year stood at PkR26.6bn, with the giant’s share dropping in PPL’s lap, with the company reporting PkR11bn in dry well costs. In 1QFY23, the exploration expenses in the sector stood at PkR9.2bn, 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 NPAT growing by 8.32xQoQ, coming in at PkR26.3bn for the quarter.

Trade Debts of OGDC and PPL stood at PkR491bn/PkR401bn at the end of the quarter, respectively, increasing by PkR34bn/PkR35bn from the earlier quarter.

The E and 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, we like MARI (TP: PkR3,330/sh) and POL (TP: PkR660/sh) due to the relatively low exposure to the circular debt menace.