Oil & Gas Development Co., Pakistan’s biggest energy explorer, reported a 9.4 percent decline in fiscal second-quarter profit after paying higher tax.
Net income in the three months ended Dec. 31 fell to 14.9 billion rupees ($175 million), or 3.46 rupees a share, from 16.4 billion rupees, or 3.82 rupees, a year earlier, the Islamabad- based company said in a statement to the stock exchange today. Sales rose 2 percent to 41.6 billion rupees.
Pakistan, which imports 80 percent of its petroleum consumption, needs to increase energy production to help curb a widening deficit. The government gives exploration companies an incentive of paying a lower tax rate when drilling increases.
“The tax rate was higher because the company spent less on exploration this quarter,” said Hamad Aslam, a research analyst at BMA Capital in Karachi, who has a “sell” recommendation on the stock. Exploration expenses declined to 1 billion rupees in the second quarter from 3.5 billion rupees a year earlier, Oil & Gas said in the statement.
The tax burden also rose because of levies paid in advance to reimburse the government for land damaged from drilling, Basharat Mirza, the company spokesman, said by telephone from Islamabad.
Energy demand in Pakistan is three times supply, according to government estimates. The country’s energy resources are depleting, prompting the government to increase gas prices in a bid to encourage exploration and help meet demand.
Oil & Gas shares rose rose 0.9 percent to 158.08 rupees at the 3:30 p.m. local time close on the Karachi Stock Exchange. The stock has fallen 7.5 percent this year.
The explorer’s crude production “contracted 2.6 percent because of depleting oilfield sources like the one called Dodak in the south, which contributes 14 percent of the company’s total production,” Shahbaz Ashraf, a research analyst with Arif Habib Ltd., wrote in a report to clients on Feb. 22. He has a “sell” recommendation on the stock.
The government, which owns a 75 percent stake in Oil & Gas, plans to raise as much as $1 billion by selling convertible bonds globally to help bridge a widening deficit, Privatization Minister Naveed Qamar said in an interview yesterday.
Prices of oil and gas in Pakistan climbed 12 percent and 22 percent, respectively, from the previous year because of rising global prices, Ashraf said.
Brent oil for April settlement rose as much as $8.54, or 7.7 percent, to $119.79 a barrel on the ICE Futures Europe exchange, the highest since Aug. 21, 2008. The contract traded at $116.33 at 9:45 a.m. London time. It has rallied 13 percent this week.
Crude for April delivery on the New York Mercantile Exchange gained as much as $5.31, or 5.4 percent, to $103.41 a barrel in electronic trading.
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