Karachi: The profitability of Pakistan's oil and gas exploration sector is expected to decline by 15% year-over-year in the second quarter of fiscal year 2026, primarily due to decreasing oil prices and reduced gas production. The sector is also projected to experience a 7% decline in earnings compared to the previous quarter, despite an increase in oil production.

According to JS Global, oil production in the quarter averaged 64,700 barrels per day, reflecting a 2% year-over-year increase. However, gas production fell by 4% to approximately 2,732 million cubic feet per day. The decline in gas volumes, coupled with a 13% year-over-year decrease in Arab Light crude prices to an average of USD 65.37 per barrel, is likely to impact earnings. Additionally, a 48% decrease in other income, due to the absence of one-off gains and a lower interest rate, is expected to further affect profitability.

Oil and Gas Development Company Limited (OGDC) is anticipated to report earnings per share (EPS) of Rs7.83, marking a 19% year-over-year and 12% quarter-over-quarter decline. The decrease is attributed to two dry wells and lower production primarily from the Uch field. OGDC is expected to announce a cash dividend of Rs3.5 per share.

Pakistan Petroleum Limited (PPL) is projected to have an EPS of Rs7.44, reflecting a 26% year-over-year decrease, though a slight 1% increase from the previous quarter. This drop is mainly due to the absence of one-off gains from the previous year. A cash dividend of Rs2.0 per share is expected to be announced.

MARI Petroleum Company Limited is expected to show a 35% year-over-year increase in earnings per share, reaching Rs12.59, though experiencing a 3% decline quarter-over-quarter. This growth is due to a reduction in operating expenses. No interim dividend is anticipated.

Pakistan Oilfields Limited (POL) is projected to report earnings of Rs18.35 per share, a decrease of 31% year-over-year and 4% quarter-over-quarter. The decline is driven by increased exploration costs. A cash dividend of Rs20 per share is expected.

Despite these challenges, the overweight stance on the Pakistan Exploration and Production sector is maintained by JS Global.

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