KARACHI - Profitability of the Exploration and Production (E&P) sector increased by 55 percent during the first quarter (July-Sep) of fiscal year 2009 due to soaring international oil prices, higher wellhead prices and depreciating value of rupee against dollar. As international prices, though declining since Jul-08 but remained high in the first quarter of fiscal 2009, averaging US$115/bbl, up 63 per cent on Year on Year basis.  The production of oil and gas of the sector on Yearly basis fell by 8.7pc and 1pc respectively. The E&P sector companies - Oil and Gas Development Company Limited (OGDCL), Pakistan Oilfields Limited (POL) Pakistan Petroleum Limited (PPL) and MGCL have posted profit after taxation of Rs29.730 billion in the quarter under review as compared to Rs19.215 billion in the corresponding period of a year back, showing an impressive growth of 55pc. OGDCL remained on the top position on the basis of share in the overall profitability of the sector in first quarter FY09, OGDCL share was 64 per cent followed by 26 per cent of PPL share. While the shares of POL and MGCL were 8 per cent and 2 per cent respectively. OGDCL oil production on yearly basis fell by 7.2pc, whereas gas production rose by a marginal 1.8pc. Pakistan Petroleum Limited (PPL) oil and gas production also fell modestly by 2.6 per cent and 0.6 per cent respectively, whereas Pakistan Oilfields Limited (POL) oil and gas production in first quarter of FY09 saw a significant fall of 25pc and 15 per cent on Year on Year basis respectively. Strong support to the bottomline was lent by the other income which contributed approximately 8.5 per cent to PBT (6.7 per cent last year). Increased activity on the exploration front was seen as field expenditures rose by 27pc on Year on Year basis as a total of 8 wells were spud in first quarter of FY09 (6 by OGDC and 1 each by POL and MGCL). The decline in oil production of the sector was mainly because of production declines at Pindori and Adhi fields,  water cuts in Dhodak and Kal fields,  annual turn around jobs in Adhi, Makori, Bobi, Kunnar and Dakhni fields,  delay in completion of development work at Chanda-3 well and,  mechanical problems at Mela-1 well.  Mela-1 well encountered mechanical problems while Mela-2 is currently under extended well testing (EWT), the resolution/completion of the above two is expected to scale the production level of the field to 7,500bpd. Pindori field's production remains a concern as its average production in first quarter FY09 fell by a massive 63 per cent on Year on Year basis, averaging just less than 1,400bpd (1,250bpd as per latest weekly PPIS figures). According to POL's quarterly report, the company is currently carrying out a field study of Pindori, the oil reserves of which are at an approx. 33mn barrels (as of Jun-08). PPL's oil production decline was mainly due to the plant shutdown at Adhi field in Jul-08, the field's oil production fell by 11pc in first quarter of FY09. Other income of the sector witnessed a huge jump of 105 percent on Year on Year basis to Rs3.75bn, mainly on the back of a 236 per cent rise to Rs2.15bn in OGDC's other income. The increase in OGDC's other income was mainly on the back of interests and dividends received and exchange gain due to the depreciating rupee against dollar. PPL's other income grew by a massive 113 per cent  to Rs1.23bn as the company has over Rs23bn in cash and short term investments which are principally held in term deposits with banks and mutual funds investments along with long term investments of over Rs1.8bn mainly parked in PIBs and TFCs. POL's other income on the other hand, fell by a sizable 42 per cent on Year on Year basis mainly due to a 98 per cent YoY plummet to Rs7.57mn, in income from investments in subsidiary/associated companies. Analysts held a view that although the falling oil prices present a downside risk to the sector's earnings, the weak rupee against the US dollar is expected to make up for it as the sector's revenues are priced on an international parity basis. However, the sector's unabated rise in trade debts is a point of concern as they have risen by 33 per cent to Rs77bn (Jun to Sept-08) mainly due to pending payments from refineries, WAPDA and gas distribution companies.