The oil and gas exploration and production sector started FY23 on a jovial note with earnings growing despite the drop in oil and gas production flows, and collective earnings touching historical levels. The growth in revenues and profits was primarily driven by higher prices as well as weaker domestic currency along with lower expenses.
Pakistan Petroleum Limited (PSX: PPL) announced its earningsgrowth at 56.7 percent year-on-year for the first quarter of FY23. The growth in revenues came from 43 percent higher crude oil prices as well as 19 percent higher Sui gas wellhead prices and 9.4 percent year-on-year growth in natural gas production during the quarter. On the other hand, the crude oil, NGL and condensate production fell by three percent in 1QFY23 on a year-on-year basis. Recall that the company posted decline in the crude oil and natural gas production for FY22, which was around 11 and six percent year-on-year, respectively. Additionally, PPL’s revenues also benefited from significant currency depreciation and the significant change in exchange rate.
Growth in PPL’s earnings for 1QFY23 was driven by growth in topline and decrease in exploration expenses, on account of no dry wells charged during the current period. However, earnings were partially offset by higher taxation, royalties and other levies and other charges. Increase in taxation was due to the imposition of super tax while royalties and other levies increased in line with higher sales revenue during 1QFY23. As per the director’s report, the growth in other charges was due to higher provision for windfall levy on oil and condensate and WPPF charge in the quarter.