Petroleum sector makes waves, OGDC wipes 112pts

APL exceeds analysts’ expectations while POL’s and MARI’s financials remain below par

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LAHORE: The oil and gas sector made waves at Pakistan Stock Exchange (PSX) throughout the day as the Oil & Gas Development Company (OGDC), down by 4.75 per cent, alone wiped out 112 points off the KSE 100 index along with Pakistan Petroleum Limited (PPL) (-1.07 per cent) and Pakistan State Oil (PSO) (-2.07 per cent) taking away 44 points.

It was earlier reported by an international news agency that an unaffiliated institutional holder of OGDC was offering 35 million shares at Rs164 – Rs168 per share at a 6.7 per cent discount from its buoyant close on Friday at Rs175.73. Subsequently, this influenced investor sentiment negatively while struggling to perform, as the oil and gas exploration sector and the refinery sector dropped its market capitalization by 2.59 per cent and 2.22 per cent respectively.

Meanwhile, oil refineries also felt the heat as they came under selling pressure amid dismal earnings announcements, with Attock Refinery Limited (ATRL -3.90 per cent) and National Refinery Limited (NRL -2.98 per cent) posting a per share loss of Rs0.74 and Rs0.68 in the 3QFY18 respectively.

Nevertheless, contrary to analyst’s expectations, Attock Petroleum Limited (APL) (+0.58 per cent) posted Net Profit After Tax for 3QFY18 above market expectations by Rs0.9 billion at Rs1.45 billion, meanwhile, Pakistan Oilfields Limited (POL) and Mari Petroleum (MARI) declared financials below market expectations.

Pakistan Oilfields Limited

POL reported earnings of Rs13.1 per share, up 11 per cent YoY in 3QFY18. Yet earnings fell short of market expectations contrary to what was reported by analysts at Topline Securities back in January, 2018. It was anticipated that POL would book revenue on enhanced gas price that it had previously reversed in 2QFY18.

POL’s managed to record revenues up by 15 per cent on YoY basis, mainly on the back of higher Arab Light oil prices, increased hydrocarbon production and currency devaluation.

Despite 19 per cent YoY decline in oil production from Makori Deep (44 per cent of POL’s total oil production) in 3QFY18, POL’s total oil production was up ~8 per cent. This was due to oil addition from Jhandial Well which contributed ~9 per cent to the company’s total oil volume during the outgoing quarter. POL’s gas production recorded around 12 per cent YoY growth in 3QFY18 mainly supported by additional flow from Jhandial well (around 7 per cent of total production) and increased flow from Maramzai (around 4 per cent of total production).

While pretax earnings of the company grew by 2 per cent in 3QFY18, lower effective tax rate, down 6.8 percentage points to 17 per cent led to net earnings growth of 11 per cent.

MARI Petroleum

MARI recorded earnings of Rs4.0 billion with earnings per share at Rs36 per share in 3QFY18, up 134 per cent YoY. Though earnings were considerably higher on YoY basis, it fell short of expectations primarily on the back of higher expenses.

Revenues grew by a considerable 55 per cent YoY during the outgoing quarter with the support of higher Arab Light oil prices, up 24 per cent to $65.6/bbl, average 6 per cent currency devaluation, unwinding of entitlement factor of Mari gas field price, higher gas production from Mari field, up ~6 per cent to average 725mmcfd and higher price benefit on incremental production – production exceeding 10 per cent from 525mmcfd is eligible for higher pricing under PP2012 – in 3QFY18.

The company’s operating expenses during the outgoing quarter were up 44 per cent YoY, attributed mainly to higher amortization expenses.

Exploration expenses witnessed a considerable decline of 83 per cent YoY in 3QFY18, primarily in the absence of any dry and abandoned well. To recall, MARI booked dry well cost of Rs1.3 billion during the similar period last year.

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