OGDCL: Higher oil prices drive earnings to Rs68.9bn, up by 63% YoY

February 23, 2022 (MLN): The largest E&P Company in Pakistan, Oil and Gas Development Company Limited (OGDCL), has disclosed its financial performance for 1HFY22 today where the company reported a profit after tax of Rs68.9bn which was 63% YoY higher than the net profits of Rs42.2bn reported in the same period last fiscal year.

Alongside financial results, the company also announced a cash dividend of Rs3.75 per share i.e., 37.5% for the period mentioned above.

The growth in OGDCL’s profitability has come largely from a 71% YoY increase in crude oil prices to $73.4/bl along with around 8% YoY depreciation in PKR against USD during 1HFY22.

The E&P giant saw its revenues grow by 36% YoY to Rs151bn in 1HFY22. The increase in revenues was due to higher international oil prices led by the resurgence of oil demand international and better well-head gas prices. However, a dip in oil and gas production by 7% and 3% YoY respectively kept the company’s revenues in check. 

The decline in the production of oil was owing to limited off-take from oil refineries and the overall depletion of mature fields.

The gross margin of the company came in at 65% compared to 58% in 1HFY21.

On the expense side, general and administrative expenses increased marginally by 1% YoY, workers’ profit participation fund soared by 69% YoY, while finance costs remained unchanged. Operating expenses that account for over 23% of net sales jumped by 3% YoY to Rs34bn mainly on account of salaries, wages and benefits and workover charges. while transportation charges soared by 27% YoY to Rs1bn.

On the exploration front, OGDCL has incurred an exploration cost of Rs6.9bn, swelling up by 32% YoY amid higher dry wells. To note in 2QFY22, OGDCL reported one dry well (Seni Gumbat).

The share of profits of the company went down by 71% YoY to Rs936mn mainly due to the share of loss booked with respect to the 3D seismic cost incurred by the associate Pakistan International Oil Limited (PIOL), which is the offshore E&P in Abu Dhabi and has recently begun exploration.

To recall, during 1QFY22, the OGDCL, along with other consortium members i.e., Mari Petroleum Company Limited (MPCL), Pakistan Petroleum Limited (PPL) and Government Holdings (Private) Limited (GHPL) has been awarded Offshore Block 5 in Abu Dhabi's second competitive exploration block bid round. The consortium companies have established an independent company PIOL at Abu Dhabi Global Market with each consortium company having a 25% equity stake in PIOL.

On the taxation front, the effective tax rate came in at 35% compared to 32% in 1HFY21.

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