For OGDC, it has been more about its prior events of late than the current or future ones.
In a rare event of making the monthly accounts public, in compliance with the Privatisation Commissions requirements for the exchangeable bond transaction; the company said its earnings for April 2011 declined by 33 percent in comparison to the same period last year.
But there is more to what meets the eye than just a decline in earnings for the month - as the financial statements have raised eyebrows amongst analysts with full-year earning projections and fair values revised downwards.
The most notable aspect of the monthly statement is the massive fall in revenues. The nearly one-fourth dip in net revenue stems from crude oil discount adjustment related to the important Kunnar field. The topline has been slashed by a massive Rs15.2 billion on account of downward field price revision, booked retrospectively.
The Kunnar field crude oil price was previously linked to the Badin-II field pricing, which has a zero-rated discount. This, however, was subject to adjustment on completion of the oil sale purchase agreement - and the ministry has now linked the field pricing with that of Badin-I, which carries discount, hence leading to reversal in prior periods revenue.
This is what led to a gross loss for the month, something which is unprecedented in the recent history of the company. Had it not been for the deferred tax of over Rs8 billion, the bottomline would have been painted all in red as the pre-tax loss mounted to Rs4.9 billion.
The higher exploration cost on account of increased dry well expenditures also made things grimmer. The final blow was delivered by high amortisation and impairment charges. The amortisation expense stood at Rs4.7 billion in April 2011 (Rs0.7 billion), which is significantly higher for a single month. More clarity is sought on this matter from the management on the nature of these charges.
The management has stated that it will continue to seek a zero-rated price discount for Kunnar field. Whether or not, the company will end up getting what it wants is anyones guess, but if the field pricing continues to be what it is now, there will be more downward revisions in the next couple of months.
Hopefully, a reversal in this decision can bring good fortunes, but until things clear out, one can expect the share price to remain under pressure.
====================================================
OGDC P&L
====================================================
(Rs mn) Apr-FY11 Apr-FY10 chg
====================================================
Sales 3,352 12,386 -73%
Operating expenses 7,258 3,053 138%
Gross profits (3,882) 7,806 -150%
Gross margins NA 63% NA
Other income 353 79 347%
Exploration expenditure 1,204 467 158%
PAT 3,374 5,021 -33%
EPS (Rs) 0.78 1.17 -
----------------------------------------------------
Source: KSE notice
====================================================
Comments
Comments are closed for this article.