Pakistan Oilfields Ltd (POL) reported its 2QFY23 earnings earlier today, wherein the company posted Profit After Tax (PAT) of PkR 5.95bn (EPS: PkR20.97) for the quarter, lower by 29%QoQ—lower than our estimate of PkR24.30/sh

·         Net sales clocked in at PkR14.02bn for the period, down by 12% on a QoQ basis, majorly on the back of declining oil prices (down 15%QoQ) during the period. Overall, total hydrocarbon production remained flat QoQ, but is estimated to have declined by 12%YoY during 1HFY23 period.

·         Exploration expenses clocked in at PkR0.95bn (down 117%QoQ), on account of no significant dry wells costs during the period. To recall, the company posted PkR4.35bn in dry well costs during the 1QFY23, on account of DGK-1 (DG Khan Block), taking total exploration expenses to PkR4.53bn for the period

·         Other income for the period clocked in at PkR2.1bn, down 68%QoQ, possibly due to minimal exchange gains during the period. Finance costs also recorded a reversal of PkR486mn during the period, possibly due to exchange gains on ‘provision for decommissioning costs’

·                   Along with the result, company also announced an interim cash dividend of PkR20.0/ sh, well below our expectations of PkR45/sh. We have a Buy rating on the stock, with a Dec’23 TP of PkR600/sh, representing an upside potential of 36% from last close.

Courtesy – AKD Research