- The exploration sector revealed a mixed performance during 2QFY25. Companies posted net sales and PAT of ~PKR 217.32bn and ~PKR 87.51bn, down by 13.23% YoY and 37.33% YoY, respectively. Major companies include OGDC, PPL, POL, and MARI.
- Lower realized prices, forced curtailment by SNGPL and UPL, and the absence of a tax rebate, which was in SPLY, negatively impacted the companies’ profitability.
- The negative price variance stems from the PKR’s appreciation against the USD, averaging PKR 278/USD in 2QFY25 versus PKR 287/USD in the corresponding period. This is accompanied by a decline in global crude oil prices, which fell from USD 87/bbl to USD 76/bbl over the same timeframe.
- The sector’s gas production reduced by 5% YoY to 2,012mmcfd in 1HFY25; likewise, oil production also reduced by 5% YoY to 47,745 bpd.
- The total exploration cost increased by 24.84% YoY to PKR 13.56bn, as OGDCL’s 2 wells (TAY NE-1 and Kandewaro-1) were declared dry and abandoned, coupled with an increase in the cost of seismic parties.
- Other income increased by 83.97% YoY driven by an improved cash position (circular debt payments and income on bank deposits).
- The effective tax rate increased to 36% in 2QFY25 from 3% in 2QFY24 due to the reversal of the tax provision against depletion allowances; similarly, in 1HFY25, it clocked in at 40.40%.
- Gross margins decreased to ~59.40% in 2QFY25, signalling a decrease of 5.14ppt YoY. Similarly, net margins decreased by 15.49ppt to 40.27% in 2QFY25 from 55.76% in 2QFY24.
