Pakistan Oilfields Limited (POL) : A strong dividend play

Key takeaways

• POL has maintained an 80% average dividend payout ratio over the last five years, offering a strong 11% dividend yield.
• Q2FY25 production increased significantly, with Jhandial field output rising from 118 bbl/day to 814 bbl/day, while gas production surged to 8.0 MMSCFD.
• 65% of POL’s oil production is dependent on the TAL Block, making its output closely linked to joint venture partners’ activities.
• Management retains a ‘BUY’ rating with a Dec’25 target price of Rs709, implying a 35% upside potential from current levels.
• TAL Block’s liability risk remains a concern, as gas price incentives under the Petroleum Policy 2012 are still pending in court.

Dividend play continues to make POL an attractive investment

Pakistan Oilfields Limited (POL) has consistently been one of Pakistan’s highest dividend-yielding stocks, maintaining an 80% payout ratio over the past five years. Despite a challenging economic environment and declining fixed-income returns, POL continues to offer a strong dividend yield of 11%, making it a compelling option for income-seeking investors.

As of Dec’24, POL holds significant cash reserves of Rs102 billion (~Rs360 per share), reinforcing its ability to sustain high dividend payouts. The company has already distributed Rs25 per share in 1HFY25, and analysts expect a full-year dividend of Rs65 per share.

Production growth: Jhandial field & TAL block drive output

POL has successfully increased production levels to offset natural declines in mature oilfields. The Jhandial field, located in the Ikhlas Block, Attock, saw a substantial rise in production:

Production Type	FY24 Output	Q2FY25 Output	YoY Growth
Oil (bbl/day)	118	814	+590%
Gas (MMSCFD)	1.4	8.0	+471%

However, 65% of POL’s total oil production comes from the TAL Block, operated by MOL. The company’s output remains dependent on joint venture partners, who are working to slow production declines. Razgir is expected to come online soon, while Makori Deep-3 is undergoing drilling, offering potential upside.

Major oil-producing fields of POL

Field	Oil Production (bbl/day)	Operator	Expected Reserve Life (Years)
Makori East	7,524	MOL	2.7
Adhi	5,697	PPL	5.7
Mamikhel South	2,597	MOL	1.2
Maramzai	2,199	MOL	3.2
Mardankhel	1,763	MOL	4.4

TAL block: potential risks & policy uncertainty

One major risk remains TAL Block’s gas price incentives under the Petroleum Policy 2012, which are still pending in court. The government imposed the Windfall Levy (WLO) in 2016, leading to price adjustments that have impacted earnings. As of Sep’24, POL had received Rs28 billion in enhanced gas prices (Rs98 per share), but future payments remain uncertain.

Financial performance & valuation

POL continues to deliver robust profitability, with strong free cash flows and attractive valuations.

Financials (Rs mn)	FY24	FY25F	FY26F
Net Sales	65,290	57,377	52,624
Gross Profit	45,394	38,432	35,528
Exploration Costs	1,606	5,842	358
Other Income	16,574	12,436	8,987
Profit Before Tax	53,239	35,986	37,838
Profit After Tax	39,152	21,822	23,015

Key Ratios	FY24	FY25F	FY26F
EPS (Rs)	137.9	76.9	81.3
DPS (Rs)	95.0	65.0	60.0
P/E (x)	3.2	7.5	7.1
P/BV (x)	1.5	2.2	2.1
ROA	23%	13%	13%
ROE	52%	28%	30%

POL currently trades at a forward P/E of 7.5x for FY25, significantly lower than its historical averages, making it an undervalued energy play.

Is POL a strong buy?

Analysts maintain a BUY rating with a Dec’25 target price of Rs709 per share, implying a 35% upside from the current price of Rs575.

Key reasons to remain bullish on POL include:

1. Attractive Dividend Yield (11%) – One of the highest in the sector.
2. Resilient Production Growth – Jhandial field expansion and new wells at Razgir & Makori Deep-3.
3. Undervalued Stock – Trading at a P/E of 7.5x FY25 earnings, well below sector averages.

However, investors should watch for risks, including oil price volatility, PKR appreciation, and potential adverse court decisions regarding TAL Block’s gas pricing incentives.

POL remains one of the most attractive high-dividend stocks in Pakistan’s energy sector, backed by strong cash reserves, steady production growth, and new field expansions. While TAL Block’s pricing concerns present a risk, the company’s resilient fundamentals and attractive valuation make it a compelling investment for both income-focused and value investors.

As global oil prices fluctuate, POL remains well-positioned to benefit from rising oil demand and currency depreciation, further enhancing its long-term upside potential.

Source: Insight Research, PSX

Here is how different research firms have set their target prices for Dec 2025:

Research firm	POL Target Price
AHL	697
AKD	750
IGI	742
JS	720
Intermarket	671
Taurus	660
Foundation	611
Insight	720
Pearl	670
Topline	578
IIS	683
Darson	762
Spectrum	688