Exploration and production companies’ profits rise 26%

High global oil prices, better production provide support.


Express May 03, 2011

KARACHI: Exploration and production (E&P) companies posted a handsome increase of 26 per cent in their profits, which stood at Rs82.7 billion in the first nine months of financial year 2010-11 as compared to Rs65.7 billion in the same period last year, says a research report.

Improved global economic outlook coupled with political unrest in the Middle East and Africa region, which sparked a rise in international crude oil prices, provided a boost to the listed E&P sector’s profits during July-March 2010-11, said Topline Securities in the research note. In addition to that, ramp-up in production from Tal and Nashpa blocks has also played a key role, which compensated for the decline in production from other major fields. Overall, the sector’s oil and gas production rose by 3.8 per cent and 3.5 per cent respectively.

Topline analyst Nauman Khan said the restricted growth in the sector’s operating expenses along with higher other income also supported the profits. Average operation cost rose by a mere seven per cent to $4.5 per barrel while other income grew by a significant 25.4 per cent to Rs7.7 billion during the period under review.

On account of a low base effect, Mari Gas Company led the way by recording a profit growth of 78.2 per cent, but the star performers were Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL). These companies’ profits grew by 45.5 per cent and 40.1 per cent, respectively.

The only listed company which depicted a decline in its oil production (down 3.8 per cent) was Oil and Gas Development Company Limited (OGDCL), but it managed to improve its profits by 15.4 per cent primarily on the back of higher net realised oil and gas prices.

However, Khan pointed out that “the major risk to the sector, particularly for OGDCL, remains the circular debt.”

Published in The Express Tribune, May 3rd, 2011.

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