The Oil and Gas Development Company‘s (PSX: OGDCL) revenues grew by 32 percent year-on-year in 1HFY19, but the increase in the top line didn’t come from higher production flow. In fact, the oil and gas exploration and production giant witnessed a decline of about 1.12 percent in average daily crude oil production, while the natural gas production that was up in 1QFY19 by around 6 percent year-on-year, was also down by almost two percent, year-on-year in 1HFY19. LPG volumes on the other hand increased by around 24 percent in the six-month period.
Decrease in crude oil volumes came from not only lower oil production from maturing fields but also lower lifting of furnace oil by the refineries in the given period particularly from Nashpa and KPD TAY reduced the actual production. Similarly, decrease in gas production came from not only the maturing fields but also the extended closure of UCH power plant.
Hence the entire growth in the E&P Company’s top line came from higher global crude oil prices and the currency depreciation that pushed the average realised prices. The average net realised price of crude oil sold was $ 62.22 per barrel in 1HFY19, up by 28 percent year-on-year; whereas the average net realised price for natural gas sold was Rs317.33 per million cubic feet, up by 25 percent, year-on-year.
On the expense side, the operating expenses that account for over 20 percent of net sales remained subdued, which helped the E&P Company lift its bottom line. OGDCL’s operating expenses largely due to workover charges and amortization of D&P assets. Exploration and prospecting expenditure went down as well in 1HFY19 as well as 2QFY19, while other income grew significantly to support the growth in the company’s bottom line. Increase in other income was a result of exchange gains due to currency depreciation and interest income due to higher interest rate environment.
OGDCL announced over 50 percent increase in its earnings for both 1HFY19 and 2QFY19. It spud six wells comprising three exploratory wells, and three development wells in 1HFY19, along with completing the drilling and testing of five wells pertaining to previous fiscal year. During the period, the company was able to make 2 oil and gas discoveries in the KPK province. OGDCL has also ventured into offshore drilling along with PPL, ENI and ExxonMobil. The companies on the lookout for oil wildcats to amp up its drilling activities.
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