Topline report attributes decline to weaker hydrocarbon output, lower crude prices, and higher taxes.

Topline has expected that oil and gas exploration companies are expected to face 8% YoY decline in earnings in 1QFY26, primarily due to a decline in hydrocarbon production and oil prices.

Oil production during the quarter averaged 62.2k bpd, down 5% YoY, while gas production fell 7% to around 2,807 mmcfd. The impact of this decline in volumes was compounded by an 11% YoY fall in Arab Light crude prices, which averaged USD71.47/barrel.OGDCL Receives Rs7.7B Dues

On a sequential basis, the sector earnings are expected to decline further, despite a modest recovery in production, with oil and gas volumes rising by 8% and 3% QoQ, respectively. The expected fall in earnings is primarily attributable to a higher Effective Tax Rate (ETR), which is expected to normalize to around 35% in 1QFY26 vs. 26% in the previous quarter.

Additionally, a 33% QoQ decline in other income, stemming from exchange losses following appreciation of the PKR from 283.76 in Jun 2025 to 281.32 in Sep 2025, is expected to further weigh on profitability.

OGDC

Topline expects OGDC to post earnings of Rs8.96/share, down 6% YoY and 4% QoQ. The YoY decline is due to an increase an opex from US$6/boe to US$8/boe, along with a 48% decline in other income due to exchange losses and lower interest rates. On a QoQ basis, the fall in earnings is expected to be driven by the normalization of the ETR to 39% vs. 28% in 4QFY25.

MARI

MARI is expected to report an EPS of Rs13.26/share, down 17% YoY mainly due to the imposition of the additional 15% royalty following the extension of Mari D&P lease. Furthermore, earnings are expected to decline by 15% QoQ, owing to the increase of ETR from 13% in 4QFY25 to 28% in 1QFY26.

PPL

Topline has expected PPL to post earnings of Rs7.17/share, down 17% YoY and flattish QoQ. The YoY drop in earnings is attributable to a 63% decline in other income, due to PKR appreciation and interest rate cut.

POL

POL’s EPS is expected to clock in at Rs20/share, up 2.2x YoY but down 24% QoQ. The sharp YoY increase stems from a low base effect, as the company had incurred high exploration costs in 1QFY25 due to a dry well. The sequential decline reflects lower other income and normalization of opex, following a substantial reversal in amortization expense during 4QFY25.

 We maintain our market weight stance on the Pakistan E&P sector,” Topline said.