Pakistan’s oil & gas sector: earnings may dip, but dividends stay strong
Pakistan’s Exploration and Production (E&P) sector is expected to see a drop in profits for the fourth quarter of FY25. But don’t worry, most companies are still likely to maintain healthy dividend payouts.
Earnings set to fall, but why?
Experts expect a 17% year-on-year (YoY) drop in profits during 4QFY25, mainly due to:
- Lower production of oil and gas
- Falling oil and gas prices
- Royalty charges on Mari Petroleum (MARI)
For the full FY25, overall sector earnings are estimated to decline 23% YoY.
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Production volumes are down
During 4QFY25:
- Oil production dropped by 15%
- Gas production dropped by 9%
This fall was mainly due to gas pipeline pressure and reduced demand from industries, forcing companies to cut output.
Company-wise performance:
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Crude oil prices fell too
The average price for Arab Light crude was $69 per barrel, down 22% YoY. This was due to:
- Higher global supply (especially from the US and Brazil)
- Weak global demand due to high interest rates
- Ongoing geopolitical tensions that didn’t escalate
Dividends look promising
Even though earnings are lower, cash flows have improved, thanks to better gas price collections and reduced receivables. This means most companies, like OGDC, PPL, and MARI, are likely to maintain their dividend payouts. Only POL may cut slightly, given its higher dependency on oil.
More exploration, better future
- 53 wells were drilled in FY25
- 21 new discoveries were made (vs 15 last year)
- New policies now allow companies to sell gas directly to customers, which could further boost the sector
Stock ratings & targets
| Company | Dec’25 Target Price | P/E (x) | Dividend Yield (FY26E) |
|---|---|---|---|
| OGDC | PKR 371 | 4.8 | 9.4% |
| PPL | PKR 285 | 4.2 | 8.5% |
| MARI | PKR 670 | 8.7 | 6.1% |
| POL | PKR 800 | 5.8 | 14.9% |
Even with lower profits, the E&P sector still offers value through strong dividends, improving liquidity, and long-term growth from new discoveries and policy reforms.
Source: AKD Securities
⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →
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