The Oil & Gas Development Company reported 25 percent growth in full year net profits on Thursday, reaffirming the view that Pakistani market would now be driven by commodity centric sectors. OGDC said it earned Rs 12.91/share for the year ended June 09, compared with Rs 10.31 in the year before.
However, being caught in the circular debt trap the firms dividend payout capacity was limited to just 63 percent - its lowest in recent memory. The low payout, which also fell short of governments expectation of Rs 10/share, was not received well by the investors who were quick to show their dissent, pushing the scrip down by more than two percent by the market close.
The firms top-line grew despite lower production volume, as average wellhead gas prices soared by 24 percent to Rs 174.78/mcf while rupee depreciated by 23 percent during FY09. This more than offset the 22 percent decline in average realised oil price, since oil and gas pricing is linked with international prices quoted in US dollars.
Meanwhile, exploration cost rose 16 percent, but the increase was justified as the company explored 30 wells, hitting two new discoveries, during the period. OGDC has been spot on in achieving its targeted exploration activities and has, in fact, gone beyond the targets more often than not.
The most significant contribution, however, came from lesser corporate tax paid by the company at 31 percent, which helped the firm to earn net margins as high as 42 percent. This was on account of base effect of last year where the company had to pay Rs 11.6 billion as tax adjustment of prior year. The firm seems to be in fine health as international oil prices are likely to witness a less volatile trend going forward.
Moreover, Pakistans economic indicators have not yet shown any significant sign of improvement in rupees value against the dollar, which bodes well for the company. With receivables amounting to a staggering Rs 65 billion as on March 2009, the only area of concern is circular debt which is minimising shareholders cash return. Should the issue be resolved as early as promised, we might see OGDC compensating for the low dividend payout in the upcoming quarter. Fingers crossed.
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OGDC P&L
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RS (MN) FY09 FY08 % CHG
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Sales 130,830 125,908 4%
Royalty 15,156 17,320 -12%
Operating expenses 22,674 19,613 16%
Gross profits 91,478 87,502 5%
Gross margins 70% 69% 1%
Other income 3,371 3,857 -13%
Exploration cost 7,460 6,613 13%
Finance cost 926 537 73%
PAT 55,540 44,338 25%
EPS (Rs) 12.91 10.31 25%
DPS (Rs) 8.25 9.50 -13%
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Source: Company results
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