Why OGDC is Pakistan's best energy bet

February 20, 2026 (MLN): From frontier oil discoveries in Khyber Pakhtunkhwa to the metals upcycle supporting the landmark Reko Diq project, Pakistan’s largest upstream producer is shaping a multi-year earnings growth trajectory even as a recent price correction offers a potential reentry opportunity.

According to Topline Securities, Oil and Gas Development Company Limited (OGDC) has been reiterated with a BUY rating, maintaining a March 2027 target price of Rs419 per share implying a total return of 48%, including a 5% dividend yield.

The stock was first flagged as a top pick in the brokerage’s 2026 strategy note released in November 2025, and since then it has delivered a 19% return, outperforming the KSE-100 Index by 11% points.

Despite a sharp 12.1% pullback over the past month, triggered largely by investor anxiety over security developments surrounding the Reko Diq copper-gold project in Balochistan, the sell-off appears overplayed, with the fundamental case for OGDC remaining intact, according to a report by Topline Securities.

The stock currently trades at a forward price to earnings ratio of just 6.3 times on FY27 estimates, a significant discount given the earnings growth story ahead.

At the heart of the bull case is a strategic pivot in OGDC's exploration activity. Pakistan's conventional oil and gas heartlands Sindh and Punjab have been explored for decades and are largely exhausted.

Recent discoveries in these mature basins have averaged only around 13m cubic feet per day (mmcfd) of gas and roughly 300 barrels per day of oil modest figures that struggle to offset natural field depletion.

The frontier regions of KPK and Balochistan are a different story entirely. OGDC's discovery at Baragzai in the Nashpa block of KPK produced 9,480 barrels per day across three formations exceeding the combined oil output of every FY25 discovery made in the central region.

On the gas side, the Spinwam and Shewa discoveries alone carry an estimated combined potential of approximately 300 mmcfd. Frontier fields also earn a price premium: Zone 1 gas is priced at $5.4 per mmbtu at a Brent price of US$65 per barrel, compared to $4.9 for new finds in safer zones.

OGDC has accelerated its push into these regions. After limiting itself to seismic work in FY23 and drilling one exploratory well in FY24, the company drilled two KPK exploratory wells in FY25 Baragzai and Gurgalot and expanded seismic coverage to four prospective sites.

The near-term pipeline includes additional seismic work over two more prospects in KPK and Balochistan, signaling a sustained strategic commitment.

The company has also made its first foray into offshore exploration, securing 8 of the 11 blocks it bid for in Pakistan's first offshore licensing round in nearly two decades, including 2 as operator.

A partnership with Turkish Petroleum (TPOC) adds a 20% interest in the Eastern Offshore Indus-C Block and a 24.87% stake in the Ziarat North Block in KPK.

Pakistan's gas sector circular debt has swelled to Rs3.2tr, including late payment surcharges, with OGDC carrying the sector's largest single-company exposure at Rs501bn as of September 2025 a figure equivalent to Rs117 per share.

For years, this outstanding receivables pile has crushed the liquidity of domestic E&P companies and capped their exploration ambitions.

The mood has shifted. Under Pakistan's ongoing IMF program, the government has committed to presenting a comprehensive gas sector circular debt resolution plan by June 2027.

A dedicated task force is evaluating options including diversion of imported LNG cargoes, a petroleum levy of Rs5 per litre, and the redirection of state-owned enterprise dividends.

The precedent has already been set by the power sector: the Economic Coordination Committee approved a Rs1.2tr bank backed settlement plan, under which OGDC has since received Rs96.45bn in payments, including a Rs50.1bn partial settlement from Uch Power whose outstanding receivables to OGDC collapsed from Rs59bn to Rs9bn.

Importantly, fresh circular debt accumulation is also being contained. Gas tariffs for captive users have been raised from Rs1,021 per mmbtu in 2019 to Rs3,500 per mmbtu by mid-2025.

As a result, OGDC's receivables recovery ratio has averaged 98% over the last eight quarters versus just 71% in FY23, and exceeded 100% in each of the last two quarters enabling the company to declare its highest-ever annual dividend of Rs15.05 per share in FY25.

Topline Securities forecasts a 39% dividend payout in both FY26 and FY27. Full recovery of the Rs501bn over three to five years would add an estimated Rs84–97 per share to the target price none of which is embedded in the base case.

OGDC's earnings are projected to dip 15% in FY26 to Rs33.7/share amid curtailment impacts, before recovering sharply to Rs46.3/share in FY27 (+37% growth) and Rs54.8/share in FY28 (+18%).

Key assumptions: Brent crude at $65/barrel, USD/PKR at Rs297.38. Gas production is forecast to rise from 652 mmcfd in FY25 to 784 mmcfd in FY27; oil from 30,919 bpd to 37,235 bpd over the same period.

OGDC's output has been significantly curtailed over recent years due to excess domestic gas supply following contracted LNG imports. At its worst point Q4 FY25 production fell to 579 mmcfd of gas and 28,540 barrels per day of oil, the lowest levels in several decades.

For the full FY25 year, forced curtailments stripped approximately 91 mmcfd of gas and 1,790 barrels per day of oil from OGDC's output.

A critical reversal is now underway. Pakistan has secured the deferment of 35 contracted LNG cargoes 24 from Qatar and 11 from Eni reducing 2026 imports to 85 cargoes from an originally contracted 120.

This amounts to roughly three fewer cargoes per month of imported gas, which estimate will restore approximately 300 mmcfd of incremental indigenous gas offtake across local E&P companies.

For OGDC specifically, production recovery is estimated at 10–12%, translating into an earnings impact of Rs3.9–4.2 per share. According to Topline Securities, the effect is expected to materialize primarily from Q4 FY26 or H1 FY27, after the winter peak demand period passes.

New discoveries and compression projects add further volume upside. Baragzai, Bitrism East, and Spinwam are projected to contribute an incremental 28 mmcfd in FY27, rising to 60 mmcfd in FY28.

Compression projects at Dakhni and KPD-TAY are expected to add 2,238 barrels per day of oil and 118.8 mmcfd of gas.

On the oil side, the deployment of Electrical Submersible Pumps at the Rajian field has already tripled flows from around 965 barrels per day in FY25 to approximately 2,503 barrels per day in H1 FY26, with similar deployments being rolled out across other fields.

OGDC holds an 8.33% indirect stake in Reko Diq one of the world's largest undeveloped copper-gold deposits located in Balochistan.

The project holds estimated reserves of 15 million tonnes of copper and 26m ounces of gold over a 37-year mine life. Pakistan's government holds a combined 25% stake through OGDC, PPL, and GHPL.

When Reko Diq's original feasibility study was completed, it used long-term price assumptions of $4.03 per pound for copper and $2,045 per ounce for gold.

The current market has rendered those numbers obsolete. Copper is trading at approximately $5.8 per pound 44% above the feasibility assumption and 66% above its 10-year average of US$3.5 per pound driven by supply disruptions, declining ore grades at major mines, and surging demand from electric vehicles, AI data centers, and renewable energy infrastructure.

Gold, meanwhile, has surged to $5,006 per ounce, more than double the feasibility assumption, underpinned by geopolitical uncertainty and sustained central bank buying.

Under the base-case projections using World Bank estimates of $4.5 per pound for copper and $3,375 per ounce for gold, well below current spot prices, the Reko Diq project is expected to contribute Rs7.03 per share to Oil and Gas Development Company Limited’s FY30 earnings.

Current spot pricing would imply a significantly higher contribution, according to Topline Securities.

The near-term caveat is real. Barrick Gold, the project's international operator, has flagged that Reko Diq is under review amid elevated security risks in Balochistan, with financial close contingent on completing that review.

According to Topline Securities expect an eventual go-ahead but with a 6–9 month delay. The recent stock correction, attributed significantly to Reko Diq concerns, is seen as an overreaction and a buying opportunity.

Beyond its domestic operations, OGDC holds an effective 10% participating interest in Abu Dhabi Offshore Block-5 through its 25% stake in Pakistan International Oil Limited (PIOL).

The block has already recorded three discoveries with an estimated production potential of 25,000 barrels per day  or 2,500 barrels per day on a stake-adjusted basis for OGDC with commercial production expected to begin by FY28.

The company has also partnered with SLB (formerly Schlumberger) for technical studies on tight gas and shale resources.

Pakistan's estimated tight gas potential of 25.2tr cubic feet and EIA-estimated shale oil and gas resources of 9 billion barrels and 105 trillion cubic feet, respectively, represent long-dated optionality against natural depletion from conventional fields.

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