Pakistan Petroleum Limited (PPL) reported its 3QFY25 earnings earlier today, clocking in at PkR21.9bn for the quarter (EPS: PkR8.05), lower by 21%YoY — in line with our expectations. The annual decline in profitability of 21% year-over-year (Yoy) was due to lower i) hydrocarbon production resulting from supply curtailments and ii) average oil prices. Alongside the earnings, the company also announced an interim cash dividend of PKR 1.0/share, taking the 9mfy25 cash payout to PKR 5.0/share (payout ratio: 19%).

·         Net Sales stood at PkR64.5bn during 3QFY25, down 15%YoY, largely led by reduced hydrocarbon production alongside lower average oil prices (Arab light: US$78.3/bbl during 3Q, down 6.5%YoY).

·         Regarding hydrocarbon production, PPL’s oil and gas output fell by 11%/7% YoY during 3QFY25, reaching 10.3k bpd of oil and 498mmcfd of gas, respectively.

·         Operating expenses for the quarter amounted PkR13.6bn, marking a 3%YoY increase. Additionally, exploration expenses totaled PkR5.0bn for 3QFY25, however, clarity is awaited in this regard as company was not actively involved in drilling of exploratory wells during the quarter.

·         Other income clocked in at PkR4.3bn, up 9%YoY. The increase is due to higher outstanding cash and ST investment balances as of Mar’25 of PkR138bn (PkR50/sh) despite declining investment yields during the period.

·         Effective tax rate for 3QFY25 stood at 37%, compared to 37%/27% in 3QFY24/2QFY25, respectively.

·         We reiterate our ‘BUY’ stance on PPL with a Dec’25 target price of PkR286/sh, alongside a DY of 6.0% during the same period. Our outlook is strengthened on the back of: i) higher future exploration prospects given improving liquidity situation, ii) 8.33% stake in highly prospective Reko Diq Mining Project, and iii) offshore working interests in Abu Dhabi Block-5, along with consortium partners and iv) improvement in cash payouts.

Courtesy – AKD Research