Is POL still a high-yield investment opportunity?
Pakistan Oilfields Limited (POL) has long been a standout player in the exploration and production (E&P) sector. With a remarkable track record of maintaining an 80% payout ratio and a strong dividend yield of 11%, POL continues to attract income-focused investors. Despite the challenges posed by natural production declines and market volatility, the company’s resilience and strategic growth initiatives make it a compelling investment.
Strong dividends and financial position
One of POL’s most attractive features is its consistent and generous dividend payout. Over the past five years, the company has distributed 80% of its earnings, reinforcing investor confidence. The company holds a substantial cash position of PKR 360 per share, further strengthening its ability to sustain high dividend payouts in the future. Analysts expect a dividend of PKR 65 per share for FY25, ensuring an attractive 11% yield for investors.
Production challenges and expansion plans
POL is actively working to sustain its production levels amid natural declines. The company has successfully increased production from the Jhandial field, significantly boosting output from an FY24 average of 118 barrels per day (BPD) of oil and 1.4 million standard cubic feet per day (MMSCFD) of gas to 814 BPD and 8.0 MMSCFD, respectively.
However, 65% of POL’s production is tied to the TAL block, making its output highly dependent on joint venture partners. The block’s operator, MOL, is making efforts to reverse the production decline by bringing new wells online, such as Razgir and Makori Deep-3. If successful, these initiatives could lead to a meaningful increase in POL’s reserve estimates.
Valuation and growth potential
With a current price of PKR 575, analysts have set a Dec’25 target of PKR 709 per share, implying a 35% upside. The company is trading at a price-to-earnings (P/E) ratio of 3.2x for FY24, making it an attractive valuation relative to its peers.
Key financials (PKR mn)
| Metric | FY24 | FY25F | FY26F |
|---|---|---|---|
| Net Sales | 65,290 | 57,377 | 52,624 |
| Gross Profit | 45,394 | 38,432 | 35,528 |
| Profit Before Tax | 53,239 | 35,836 | 37,830 |
| Profit After Tax | 39,152 | 21,822 | 23,076 |
| EPS | 137.9 | 76.9 | 81.3 |
Risks to consider
While POL presents an attractive investment case, it is not without risks:
- Volatility in oil prices – A sharp drop in global oil prices could impact revenue and earnings.
- Lower-than-expected production – If new wells do not meet expectations, production declines could accelerate.
- PKR appreciation – Since POL’s revenue is linked to international oil prices, a stronger PKR could reduce earnings.
- Regulatory uncertainty – Government policies on windfall levies and gas price incentives remain a risk.
- TAL block dependency – The company’s heavy reliance on the TAL block makes it vulnerable to operational issues in the field.
Final thoughts
POL remains an attractive option for investors seeking strong dividend yields and long-term value appreciation. Its financial stability, efforts to sustain production, and undervaluation relative to peers suggest potential for upside. However, investors should remain mindful of the risks associated with oil price volatility and regulatory challenges.
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