Pakistan Oilfields posts lower than expected earnings

Pakistan Oilfields (POL) announced consolidated earnings of Rs3.2 billion (EPS: Rs11.4) for 3QFY19, lower than market expectations, mainly on the back of higher exploration charges. Exploration charges were reported at Rs1 billion, attributed to higher geological and geophysical cost.

During the outgoing quarter, POL’s revenues grew by 22%YoY, mainly due to 20% deprecation of Pak rupee against the greenback.

While Arab Light crude prices during the quarter under review declined by 3% to US$63.8/bbl, oil and gas production of POL declined by 5% each.

Other income for the quarter was up 18%YoY, likely on the back of higher income on bank deposits on account of hike in policy rate to 10.75% and exchange gain on financial assets.

The 9MFY19 earnings were reported at Rs11 billion (EPS: Rs39), led by higher oil prices up 19%YoY and currency depreciation.

The key risks facing the Company are:  1) inability to receive higher gas price incentive on TAL Block owing to a dispute pending in the court, 2) lower than anticipated international oil prices, 2) significant exploration and development cost and 3) unexpected field shutdown.

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