POL Tax Relief Unlocks Earnings Boost as Rs39bn Awaits Verdict

KARACHI: Pakistan Oilfields Limited (POL) enters FY27 with three things working on its earnings. It has a lighter tax bill, a new gas well months from production and a pump programme reviving ageing oilfields. It also carries Rs39.2 billion of revenue it still cannot count.

The end of super tax did the heaviest lifting. POL's applicable tax rate dropped to 52.53% in FY26 from 62.72% a year earlier, a fall of about 10 percentage points. The company also reversed Rs1.7bn of super tax during the year. The arithmetic matters for shareholders. At the old rate, POL kept about Rs37 from every Rs100 of pre-tax profit. At the new rate, it keeps about Rs47. A brokerage covering the stock called the lower rate positive for future earnings and kept its BUY rating.

A one-off for peers, a lasting shift for POL

Focus Pakistan learned that super tax reversals have swelled profits across the exploration sector this results season. OGDC reversed around Rs50bn of provisions, and Pakistan Petroleum also gained from a reversal after a Federal Constitutional Court judgment.

POL's Rs1.7bn looks modest beside those numbers. The lower rate going forward carries more weight than the one-time write-back.

POL posted an unconsolidated FY26 profit of Rs31.92bn, or Rs112.45 per share, on net sales of Rs63.03bn. The board declared a final dividend of Rs72.50, lifting the full-year payout to Rs100 per share.

Every mature oil company fights the same enemy: fields that produce less each year. POL has found one way to fight back.

Also Read: Oil Giants Make Rs214 Billion as Tax Reversal Supercharges Profits

At Minwal-X1, an electric submersible pump (ESP) lifted output from 48 barrels per day to about 300. That is more than six times the earlier flow. The company now plans ESPs at four more wells: Balkassar A-7, Joyamair, Balkassar Deep-1 and Balkassar A-3.

Gas offers a second front. The Bilitang well in the Tal block tested around 26.5 million cubic feet per day. The brokerage expects production to start in the second quarter of FY27, between October and December this year. It says the new gas will help offset natural decline at older fields.

The cost that bit

The year also brought pressure from the currency market. The rupee's appreciation added about Rs2.6bn in exchange losses.

The Rs39bn wildcard

The biggest unknown sits in a courtroom. The windfall levy on oil dispute over the Tal block has kept POL from booking Rs39.2bn of extra gas price revenue. POL will recognise the amount only after the court resolves the case. The sum exceeds POL's entire FY26 net profit. As gross revenue, though, it would not reach the bottom line intact. The dispute stems from the Tal block's move to the 2012 petroleum policy. The case remains before the courts.

Cheap on paper

The stock trades at 6.7 times forecast FY27 earnings and offers a dividend yield of 12.8%, according to the brokerage. The tax relief already shows in the numbers. The pumps and Bilitang still need to deliver, and the court has yet to rule.