E&P Sector Earnings Down 15% in 2QFY26
Net sales for the sector remained flat on a YoY basis and grew by 3% QoQ to Rs217bn in 2QFY26. This QoQ growth is primarily attributable to a slight increase in oil production during the quarter.
The country’s total oil production averaged 64,773 bpd in 2QFY26, reflecting a 2% YoY increase, while gas production fell 4% YoY to around 2,736 mmcfd. In addition, crude oil prices fell 13% YoY to US$65.37/bbl from US$75.30/bbl in 2QFY25.
Read More: OGDC Profit Falls 16% in 2QFY26
Exploration costs increased 4% YoY and nearly doubled QoQ, led by two dry wells recorded by OGDC, along with higher seismic acquisition costs, mainly in the frontier region.
The sector’s other income declined 38% YoY to Rs21.4bn, mainly due to lower interest rates. However, on a QoQ basis, other income increased by 32%, likely driven by higher interest income, lower exchange losses, and a one-off farm-out of working interest income in PPL.
The sector declared dividends of Rs61.9bn in 1HFY26, translating into a payout ratio of 40%.
OGDC: OGDC posted a 16% YoY decline in earnings during 2QFY26 due to a decline in production and a 2.2x surge in exploration costs. The company also announced a cash dividend of Rs4.25/share in 2QFY26, taking the half-year payout to Rs7.75/share.
PPL: PPL’s earnings declined 26% YoY, mainly driven by higher operating costs and lower other income during the quarter. The company announced a cash dividend of Rs2.0/share, taking the half-year payout to Rs4.0/share.
MARI: The company posted earnings growth of 15% YoY, led by lower exploration costs. However, earnings declined 18% on a QoQ basis due to an increase in operating costs. MARI announced a half-year dividend of Rs8.3/share during the quarter.
POL: POL’s earnings witnessed a 17% YoY decline but grew 16% QoQ. This QoQ increase was driven by modest growth in oil and gas volumes during the quarter and higher other income, likely as a result of lower exchange losses. The company announced a half-year dividend of Rs27.5/share.
We maintain our overweight stance on the Pakistan E&P sector.