KARACHI - Pakistan Petroleum Limited (PPL) top line registered a growth of 34.7 per cent to Rs 61.6 billion on year-on-year basis; primarily owing to a surge in gas wellhead prices by 30pc YoY in FY09. According to the financial report of the PPL, the increased gas wellhead price mitigated the effect of accumulated decline of 5pc YoY in oil and gas production (as per company management). Oil production surged by 2pc YoY benefiting from improved production from Mela (23pc YoY), while gas production marginally slid by 3pc YoY main culprit being Sui (-6pc YoY), Sawan (-10pc YoY) and Makori (-18pc YoY) fields. Furthermore, royalty payment surged by 35.3pc YoY in the resonance of the increase in the top line. On one hand, according to the reports the field expenditure inflated by 23.1pc YoY to Rs 7.5b on account of expensing out of 5 exploratory dried wells. While on the other hand, inflationary impact on other major heads of field expenditure, as per the company management. Other noticeable change from last year was the surge in financial cost by 40.5pc YoY to Rs 93.6m, early pointers towards encompassment of E&P sector towards circular debt. In this regard, according to news reports, PPL receivables from gas distribution companies stand at Rs 16.2b while WAPDA has to pay Rs 5.8b. Tax-to-operating profit also slid by 138bps YoY to 33.9 pc in FY09 benefiting from lower tax liability due to unsuccessful drilling activities during the year. PPLs bottomline witnessed a mammoth growth of 40.6pc YoY to Rs 27.7b (EPS Rs33.37) in FY09. In addition, company also declared cash divided of Rs 3/share which translates into a full-year payout of Rs13/share along with 20pc bonus shares. According to company notice, PPLs board of directors has recommended an increase in authorised ordinary share capital to Rs 15.0b (1,500m ordinary share at Rs10 par value) from Rs 10.0b (1,000m ordinary share at Rs10 par value). The increase is deemed to be a direct outcome of PPLs announcement of 20pc bonus shares which will increase its paid up capital to Rs 9.9b. Therefore, this rise in authorised capital would provide room for future enhancement of paid-up capital in the form of bonus shares or secondary offerings. However, this change is of natural and would not have any impact on companys valuations. The borated international crude oil prices in 2HFY09 would render into 27pc HoH reduction in Sui and Kandkot (combined contribution 79pc in PPLs gas production) wellhead gas prices, which is expected to suppress companys FY10 earnings. However, increased gas production from Hala and Manzalai fields coupled with resurgence in international oil prices (currently at $70/bbl) will more than offset the aforementioned impact and will provide impetus for future growth. Furthermore, company plans to drill 10 wells in FY10, which would also augment companys oil and gas production.