Pak Oilfields (POL) reported earnings per share (EPS) of Rs. 43.55 for the 3rd quarter (Mar 2024), down from Rs. 57.2 last year. No cash dividend was declared. Normally, POL pays cash dividends with half-yearly and annual results.
On a nine-month basis, the EPS was Rs. 105.5, showing a modest decrease from Rs. 107.8 last year.
Net income after tax for the third quarter was Rs 12.36 billion, around 24% down compared to the third quarter last year. The main reason for the decline was on account of 'other income', though the gross profit was slightly up this year and financial charges were substantially reduced by over 87%. But the decline in 'other income' from Rs. 14.3 billion in the 3rd quarter last year to just Rs. 3.98 billion this year had a huge negative impact on the profit this quarter. Note that the other income last year was unusually high and has since normalized.
Exploration costs of Rs 316 million were down 63% over last year.
The POL tax rate was around 10% for the quarter and was about the same as last year. The POL quarterly tax rate sees considerable variance, e.g., for the second quarter, it was close to 39%.
The profitability of POL depends on two key variables: fluctuations in international oil prices and exchange rate changes.
POL holds a 25% stake in National Refinery and a 7% stake in Attock Petroleum, and gets dividends from these companies accounted for under other income. But 'other income' from 'exchange gain' and from financial assets hugely surpasses the dividend income from its holdings. And at times, 'other income' dwarfs the core income of POL.
The financial charges also have an interesting pattern; the inter-group lending and borrowing conceal a lot of what goes on with the company's finances.
POL is one of the heavyweights of PSX, with 3.6% weight in the KSE30 Index and 2.5% in the KSE100 Index. It is not represented in KMI30, however.
Despite being a heavyweight in key Pakistani stock indexes, POL's stock price has underperformed the broader market recently (11% return in 6 months vs 42% for KSE100).
POL is trading at a low PE of 3.5 and a price to book of less than 2.
Its market cap is around $500 million USD.
See POL Price chart and note years of hitting its head to the ceiling.
