KARACHI - Exploration and Production (E&P) sector reported growth of 12 per cent in the third quarter of FY08. The E&P sector contains Pakistan Petroleum Limited (PPL), Pakistan Oilfields (POL) and Oil and Gas Development Company (OGDC), representing approximately 98 per cent of the sector's market capitalization. According to their financial results the topline of the E&P sector grew by an impressive 17 percent Year on Year basis (YoY) mainly on the back of increased oil and gas production and higher realized oil and gas prices. Arab Light prices during 9MFY08 averaged USD83/bbl whereas an average of approximately USD60/bbl was observed last year. Oil production of E&P sector during 9MFY08 stood at 53,650bpd as against 50,017bpd last year, a YoY rise of 7 percent. This rise in oil production was mainly contributed by Bobi, Chanda, Dakhni, Kunar, Pasakhi, Mela, Adhi and Makori fields. Gas production on the other hand witnessed a YoY increase of 2 percent, from 2,004mmcfd to 2,046mmcfd; Dakhni, Qadirpur, Uch, Buzdar and Makori fields were the main benefactors to this increase. Total production of the E&P universe was recorded at 415k boepd, up from 404k boepd last year (+2.7 percent YoY). Royalty payments of the E&P sector rose by a significant 27 percent YoY in 9MFY08 due to higher net sales of the companies. Exploration costs however, remained relatively stagnant with subdued activity on the exploratory drilling front as a meager 3 percent increase, to Rs7.7bn, was seen in the cumulative exploration costs of the three E&P companies. The passive exploration activity and controlled operating expenses along with higher realized prices significantly improved the E&P sector's operating profits during the 9MFY08 period by 21 percent, to Rs87bn. Activity remained dull on the drilling front as a total of 22 wells were spud in the first nine months of the current fiscal year by the three major listed E&Ps. In the exploratory wells category; 4 wells were spud by OGDC and 2 by POL while PPL remained inactive on the exploration front. In the appraisal/development wells category; 11 wells were initiated by OGDC, 3 by POL and 2 by PPL. Analysts have assumed Arab Light prices to average USD95/bbl in 4QFY08.