Pakistan Petroleum’s earnings hit harder than expected

KARACHI: Pakistan Petroleum’s profits went down by 15.8 per cent in the financial year 2010, with a net income of Rs59.9 billion, according to a statement released by the company on Friday. They announced a cash dividend of Rs5 per share.

The downward revision in wellhead gas prices hit the company’s bottom line harder than analyst expectations despite new production flows from Manzalai, Hala, Latif and Gambat. The company was expected to post a yearly decline of 12 per cent in earnings with a dividend of seven to eight rupees.

The company’s performance in 2010 is lacklustre compared to 2009, when the firm saw its net income jump sharply by 41 per cent over previous year.

PPL posted a net profit after tax of Rs23.3 billion for financial year 2010 (July-June) against a profit of Rs27.7 billion last year.

The decline in the company’s bottom line is primarily due to lower other income, which had gone down by 37 per cent to Rs2.6 billion and higher field expenditures, which had gone up by 38 per cent to Rs18.3 billion.

Lower other income is due to a decline in bank deposits amid circular debt-led cash constraints, said Topline Securities analyst Farhan Mahmood. He explained that the company’s higher field expenditures were a result of Emergency Response Plan (ERP) to control a fire in the Sui field and the one-time impact of dry hole found at offshore Indus M Shark-I. The company incurred a one-time cost of Rs1.4 billion related to Sui and an estimated expense of Rs1 billion at offshore Indus M.

The company declared earnings per share (EPS) of Rs23.42 in the year ended June 2010, as compared to Rs27.82 in the same period last year.

It is interesting to note that the company posted profit of Rs6.6bn (EPS Rs6.6) versus net earnings of Rs6.7bn (EPS Rs6.7), almost flat compared to last year, in the fourth quarter of financial year 2010.

Pakistan Petroleum Limited (PPL) is an exploration and production company. It is engaged in exploration, development and production of oil and gas. The company operates five producing fields across Pakistan at Sui, Adhi, Kandkhot, Chachar and Mazarani and holds working interest in seven partner-operated producing fields. These include Qadirpur, Miano, Sawan, Block 22 (Hasan, Sadiq and Khanpur) and Tal Block (Manzalai).

In Pakistan, the company’s exploration portfolio comprises 22 blocks. Of these, PPL operates seven through joint ventures with other exploration and production companies and has working interest in 15 other exploration areas, including three off-shore blocks, as non-operating partner.

PPL also has an interest in an exploration licence in Yemen in a joint venture with OMV (Pakistan) Exploration GmbH. During the year ended June 30, 2009, the company produced 356,195 million cubic feet of natural gas and 953,000 barrels of crude oil.

Published in The Express Tribune, August 7^th, 2010.