KARACHI, Jan 14: Oil and gas exploration and production (E&P) companies are sometimes the least understood by an ordinary investor, due to the complex nature of its accounting and reporting systems. But for all that energy stocks were seen to have withstood the vagaries of the year 2008, with the least loss.

“Many energy shares were able to outperform the market,” says, analyst at JS Global. He noted that Oil Marketing Companies (OMCs) and refineries had benefited from huge inventory gains in the first half 2008. E&P and power companies booked improved profits on the back of loss in value of the rupee.

Second half of the year 2008, saw oil prices plummet in the international market, leaving scars on the energy stocks. But relative to the KSE-100 index, which had plunged by an unprecedented 58 per cent in 2008, the three main E&P stocks emerged better off.

Pakistan Petroleum Limited (PPL) shed 46 per cent of the value; outperforming the index by 12 per cent; OGDC lost 50 per cent, 8 per cent lesser than the index and Pakistan Oilfields just about equalled the index decline-and no more.

Most analysts expected Energy companies to post sweeter and warmer results this winter, compared with the bitter and cold numbers forecast to be released by most of the sugar; fertiliser, textile companies and banks.

“We expect the production of the overall E&P sector to grow at three-year CAGR of 7 per cent during FY2008-11 and earnings of the sector to grow at 14 per cent during the same period,” summed up energy sector analyst at Taurus Securities in his report of Jan 13.

Analyst at BMA Capital Management, published a positive sector report on Jan 6, headlined: “Solid Fundamentals,” which the analyst attributed to numerous factors including “expected steady demand and solid production growth.”

“We maintain our ‘overweight’ stance on the E&P sector backed by expectations of steady demand, handsome production growth and protection from rupee depreciation due to US dollar denominated revenues,” analyst said.

Analysts forecast drilling activity to maintain its momentum going forward. The industry as a whole planned to drill 90 wells during the year.

In FY09YTD, OGDC had spudded 10 wells. PPL also planned to drill that many wells on average over the next few years while POL was expected to remain passive in its exploration efforts and drill close to five wells annually, on average.

To make things more cheerful for the energy sector, two important regulations arrived early this month: (1) introduction of a new E&P Policy 2009 and (2) upward revision in OMC marketing margins to 4pc from 3.5pc. Those were viewed by analysts as favourable for both the upstream and downstream oil sector.