Pakistan Oilfields Limited (POL) reported a 34% quarter-on-quarter decline in profit after tax to PKR 8.2 billion in the first quarter of FY27, as lower oil prices and the absence of a one-off super tax reversal weighed on earnings, according to Optimus Research.
Earnings per share fell to PKR 28.86 from PKR 43.69 in the June quarter. The sequential decline came as realised oil prices dropped 13% quarter-on-quarter, while the previous quarter had benefited from a super tax reversal that did not recur.
Lower Oil Prices Weigh on Quarterly Performance
POL’s net sales declined 18% sequentially to PKR 16.5 billion during the quarter, reflecting the impact of weaker realised oil prices. Gross profit fell 26% to PKR 10.6 billion, highlighting the pressure on earnings despite continued production activity.
Operating expenses increased 12% quarter-on-quarter to PKR 4.1 billion. According to Optimus Research, the increase reflected normalised amortisation charges and higher joint-operation costs associated with production, particularly in the Tal Block fields.
The combination of lower revenue, reduced gross profit and higher operating expenses contributed to the company’s weaker sequential performance.
Year-on-Year Earnings Growth Remains Strong
Despite the quarterly decline, POL’s profit after tax increased 51% year-on-year in the first quarter of FY27. Sales grew 26%, supported by oil prices that were 26% higher than a year earlier and a 28% increase in gas production.
The contrasting quarterly and annual results reflect changes in the pricing environment and the impact of one-off items in the preceding period.
Exploration costs dropped 83% year-on-year to PKR 193 million. The company focused mainly on seismic surveys at the Turkwal Lease rather than more aggressive drilling activity.
Other income rose 58% year-on-year to PKR 2.9 billion, supported by higher cash and investment balances. POL held excess liquidity of PKR 124.8 billion at the end of September, providing a substantial financial buffer.
Tal Block Production Supports Output but Raises Costs
Overall production, measured in million barrels of oil equivalent, increased 15% year-on-year, driven largely by fields in the Tal Block. Higher output supported revenue growth compared with the same period last year, although increased production activity also contributed to operating costs.
The company’s production performance remains an important factor in its earnings outlook, particularly as oil prices fluctuate and operating expenses change with activity levels.
Drilling Activity and Production Curtailments Remain Key Factors
Looking ahead, easing production curtailments and ongoing drilling at Jhandial, Ikhlas and Gurgalot are expected to provide some support to earnings.
However, POL’s significant dependence on the Adhi and Tal blocks, alongside relatively subdued exploration activity, continues to pose a risk to longer-term production growth.
The company’s future performance will therefore depend partly on the success of ongoing drilling, the sustainability of production levels and movements in realised oil prices.
While the 51% annual increase in first-quarter profit demonstrates stronger performance compared with FY26, the sequential decline highlights the sensitivity of POL’s earnings to commodity prices and non-recurring tax adjustments.