lahore- The Oil & Gas Exploration and Production sector concluded an impressive FY14 on a high note with a robust 88 per cent growth in profitability to Rs49.1 billion during 4QFY14. Consequently, full year profitability of the sector witnessed an impressive growth of 31 per cent YoY to Rs188.2 billion in FY14 compared to Rs144.1 billion in FY13.
Statistics show that the notable growth in earnings during FY14 can be attributed to 9 per cent YoY growth in average level of oil production, 25 per cent YoY lower exploration cost (on reduced dry well write-offs) and healthy other income, which has increased by 11 per cent. Moreover, 7pps reduction in effective tax rate further added to the growth in profitability. Despite the strong trend in earnings growth, several E&P companies underperformed primarily due to liquidity and price concerns owing to secondary offering (SPO), delay in absence of any major discovery on the exploration front and 6 per cent appreciation in rupee value against USD in 2HFY14. Energy experts believe the E&P sector is gearing up for an eventful year owing to completion of major development projects (KPD-TAY, Sinjhoro, Uch-II), tie-in of previous successful exploration attempts (Gambat South, Ghauri, Naushahro Firoz), ramp-up of production from TAL, Latif and Adhi blocks and start of exploration in newly awarded concessions (priced at USD4-6/mmbtu).