PPL’s Rs623 Billion Unpaid Bills Overshadow Record Rs99 Billion Profit

KARACHI, Nov. 10 (Focus Pakistan) - The US-Iran war helped Pakistan Petroleum Limited charge more for its oil and gas. Collecting the money remains another matter.

The PPL profit tally came in at Rs99 billion after tax for the year to June 30, Rs7 billion more than a year earlier. That works out to a 7% gain, the company’s corporate briefing shows. Revenue grew faster. Net sales hit Rs264 billion, 9% above the previous year’s Rs243 billion. Shareholders got a fatter cut as well: PPL paid out a third of its earnings in cash dividends, up from 22%.

Spread across 2.72 billion shares, the profit comes to roughly Rs36 a share, a figure calculated from the company’s paid-up capital. Return on equity barely moved at 13%. Out of every Rs100 in sales, about Rs37 ended up as profit.

Higher crude prices did much of the work. PPL prices its gas on a sliding scale linked to crude, and oil climbed after the US-Iran conflict. Gas is the bigger earner by far, at 59% of revenue. Oil adds another 34%. So when crude moves, PPL’s top line moves with it.

Volumes did their part too. PPL sold 552 million standard cubic feet of gas equivalent a day (MMscfde), against 539 MMscfde the year before. PPL also benefited from the reversal of domestic gas curtailment after the conflict. Lower dry-well costs and the reversal of a super tax provision added to profit. Higher operating costs and thinner interest income took some of it back.

PPL’s own briefing spells out the risk: higher prices lift its profitability, “and vice versa.”

Receivables remain the stock’s biggest drag. PPL’s trade receivables reached Rs623 billion by June 30, up from Rs592 billion a year earlier.

The longer view looks starker. In 2020-21 the figure stood at Rs282 billion. It then climbed every year, through Rs366 billion, Rs513 billion and Rs578 billion, a rise of about 121% in five years. The current balance equals more than six times annual profit and close to 80% of PPL’s equity of about Rs780 billion.

Two gas utilities account for 96% of it. Sui Southern Gas Company owes Rs329 billion and Sui Northern Gas Pipelines Rs267 billion.

There is better news on cash. PPL collected Rs284 billion during the year, its highest ever. The collection ratio slipped to 91% from 93%, and the company blames a lag after crude prices jumped in the fourth quarter. Without that lag, PPL says, the ratio would have reached 95%. Management also credits recent price revisions with slowing the build-up.

The exploration record gives investors something to work with. PPL logged 11 discoveries, two in fields it operates, and replaced 102% of the 2P reserves it produced. It also won eight new offshore blocks and will operate two of them.

Next year’s plan includes ten exploration and appraisal wells, six development wells and new seismic surveys covering 450 line kilometres in 2D and 1,470 square kilometres in 3D. PPL forecasts production of around 680 MMscfde, depending on gas curtailment. A front-end engineering study is under way on offshore Block 5 in Abu Dhabi.

Reko Diq adds another uncertainty to PPL’s growth plans. The project’s operator is reviewing it because of the security situation, though development work continues. PPL holds a one-third stake in Pakistan Minerals (Pvt) Limited, which owns an indirect 25% share in the copper-gold mine.

The state sits on both sides of this ledger. The government’s 74.9% stake in PPL now stands transferred to the Pakistan Sovereign Wealth Fund, according to the briefing. The government also holds majority stakes in both utilities that owe PPL Rs596 billion.

For the 25.1% of PPL in other hands, the year delivered higher earnings and a bigger payout. Whether that continues depends on two things PPL cannot control alone: crude prices and the utilities’ payments.