OGDC: Blooming

April 29, 2022 (MLN): Oil and Gas Development Company Limited (OGDC) has reported a robust increase in net profits during nine months of the current fiscal year as its profits jumped by 69% YoY to Rs112 billion (EPS: Rs26.05), compared to the profits of Rs66.3 billion (EPS: Rs15.43) earned in the same period last year.

Alongside financial results, the company announced an interim cash dividend of Rs4.75 per share for the period under review.

Despite the reduction in production of oil and gas, the company has posted a revenue of Rs240bn against Rs176bn in SPLY, recording a growth of 36.2% YoY mainly attributable to the increase in international crude oil prices and PKR depreciation against USD. As a result, the gross margin has increased to 67% from 60% last year.

The operating cost has increased by 1.4% YoY to Rs50.54bn as compared to Rs49.87bn during SPLY. Furthermore, other income has been increased by 3.6x YoY on account of exchange gain on foreign currency accounts along with higher interest income on cash and cash equivalents. while the exploration cost has been decreased by 10.3% YoY to Rs9.69bn owing to the lower cost of dry wells.

To sustain production, OGDC is also making progress on its ongoing development projects including the Qadirpur compression project takes production capacity to 237mmcfd of raw gas, which is completed in Feb’22 and the Uch compression project is likely to be completed by Dec’23 and expected to add incremental 40mmcfd to production.

According to a note by Insight Securities, in FY22, the company invested in offshore drilling, so far $100mn has been invested in the project, with a 25% equity stake. As per management, seismic activity and initial studies have been done, but it will take some time to expedite things with regard to the reserve size of the block. OGDCL’s total remaining recoverable 2P reserves stood at 74 mmboe of oil and 603 mmboe of gas.

In a recent development, OGDC & PPL has entered into a non-binding framework agreement with GOP, Govt. of Balochistan, BMEC and Barrick Gold Corporation for a joint mining project at Reko Diq Mine wherein OGDC will have to pay $187.5mn as an initial entry fee. Going forward, any material development in this regard would prove to be an upside trigger, it added.

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