KARACHI, October 29 2024: Pakistan Petroleum Limited (PPL) announced its financial results for the first quarter of FY25 today, revealing a mixed performance characterized by a notable rebound from the previous quarter. The company reported earnings of Rs23.6 billion, resulting in an earnings per share (EPS) of Rs8.67. While this represents a 20% decline year-on-year, it reflects a robust 32% increase compared to the previous quarter, highlighting PPL’s recovery trajectory.
In a significant move for its investors, PPL also declared a cash dividend of Rs2 per share for 1QFY25—the first such payout in 16 years, with the last dividend being paid in the September 2008 quarter. This decision underscores the company’s commitment to returning value to shareholders, particularly after a challenging period marked by fluctuating oil prices and production challenges.
PPL’s 1QFY25 results surpassed industry expectations, largely due to lower-than-anticipated exploration expenses. The exploration costs totalled Rs1.5 billion, down 24% year-on-year and a striking 79% from the previous quarter. This reduction was attributed to decreased seismic activity and the absence of dry wells during the quarter, though analysts await detailed accounts for further insights.
Despite the positive developments in exploration expenses, net sales for PPL declined by 15% year-on-year to Rs66 billion, driven by reduced oil and gas production alongside lower global oil prices. However, on a quarter-on-quarter basis, net sales saw a modest increase of 3%, reflecting improvements in production levels.
The company’s royalty expense was reported at 15.9% of sales, slightly down from 16.2% in the previous quarter and consistent with the figure from 1QFY24. This stability indicates effective management of costs amidst fluctuating revenue.
Another bright spot in PPL’s financials was a substantial increase in other income, which surged by 70% year-on-year and 18% quarter-on-quarter to reach Rs6.4 billion. This increase was primarily driven by a rise in short-term investments, which climbed from Rs80 billion in March 2024 to Rs105 billion in June 2024, reflecting improved cash recovery efforts.
The effective tax rate for the quarter stood at 39%, a slight increase from 38% in 1QFY24 and 37% in the previous quarter, suggesting a consistent tax burden on the company’s earnings.
Overall, analysts maintain a positive outlook on Pakistan Petroleum, with a “Buy” recommendation. The stock currently trades at an estimated FY25 price-to-earnings (P/E) ratio of 3.8x, indicating potential for future growth as the company navigates its recovery and reinvests in its core operations.
As PPL looks ahead, the combination of improved operational efficiency and strategic financial management may position it favourably to weather ongoing market challenges and deliver enhanced shareholder value in the upcoming quarters.