Karachi: Pakistan's oil and gas exploration sector experienced a decline in earnings for the second quarter of the fiscal year 2026, with overall profits falling by 15% year-over-year and 7% quarter-over-quarter. The sector reported earnings of Rs74 billion despite a 3% quarterly increase in net sales, which reached Rs217 billion. This growth was chiefly attributed to a modest rise in oil production.
According to JS Global, the country's oil production averaged 64,773 barrels per day in the second quarter, marking a 2% increase from the previous year. However, gas production decreased by 4% to approximately 2,736 million cubic feet per day. Additionally, crude oil prices declined by 13% year-over-year, falling to $65.37 per barrel.
A significant factor contributing to the sector's financial strain was the surge in exploration costs, which rose by 4% year-over-year and nearly doubled quarter-over-quarter. This increase was largely due to two dry wells recorded by Oil and Gas Development Company (OGDC) and heightened seismic acquisition expenses in frontier regions. Other income for the sector decreased by 38% year-over-year, despite a 32% quarterly rise driven by higher interest income and reduced exchange losses.
The sector's companies varied in performance. OGDC saw a 16% year-over-year drop in earnings, influenced by reduced production and increased exploration costs. Pakistan Petroleum Limited (PPL) reported a 26% decline in earnings, attributed to higher operating costs and reduced other income. Conversely, Mari Petroleum Company Limited (MARI) experienced a 15% year-over-year growth in earnings, although its quarterly earnings decreased by 18%. Pakistan Oilfields Limited (POL) observed a 17% yearly decline in earnings but a 16% quarterly increase.
The sector announced dividends totaling Rs61.9 billion for the first half of the fiscal year, with a payout ratio of 40%. OGDC declared a cash dividend of Rs4.25 per share for the quarter, while PPL announced Rs2.0 per share, MARI Rs8.3 per share, and POL Rs27.5 per share. Despite the challenges, the sector maintains an optimistic outlook with an overweight stance.
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