For the past couple of years, the E&P sector earnings had remained depressed primarily due to multiyear low prices. However, FY17 has been anticipated to be better for the oil and gas exploration and production sector due to better crude oil prices along with improvement in productivity. Oil and Gas Development Company Limited (PSX: OGDCL) announced its annual financial performance last week, and finally there is some relief seen in the numbers.
OGDCL's financial performance in FY17 was also a victim of low oil prices, and hence weaker production flows. However, FY17 has brought a growth of over 5 percent, year-on-year in the revenues. While this growth is robust, it sure is a sign of better times for the E&P giant. During the fiscal year, average net realised price of crude oil was around $44.04 per barrel, which is an increase of 12.7percent, year-on-year.
OGDCL's top-line growth came from recovery in oil prices as also increase in oil production. Where the firm has seen stagnation in the production in flows in the last five years, average daily crude oil production increased by around 8 percent, year-on-year to 44,041 barrels of oil per day (bpd). However, gas production remained flat at Rs1051 million cubic feet per day (mmcfd). Moreover, average net realised natural gas price was Rs239.08 per million cubic feet (Mcf) in FY17 as against Rs253.77/Mcf during corresponding period last year.
OGDCL's bottom-line surged by 6.4 percent year-on-year in FY17; and apart from the revenue accretion, the growth in earnings also came from lower exploration cost. This means a lot as an increased effort to find new hydro carbons coupled with lower exploration expense is a boon for the E&P firm. It also goes onto show that while OGDCL has been aggressively operational, it did not declare any dry wells in FY17, which is reflected in lower exploration charges.
Increased drilling and exploration activity is evident from the acquisition of 4,034 Line kilometers of 2D and 1,153 square kilometers of 3D seismic data; OGDCL spudded 22 new wells including 11 exploratory/appraisal wells and 11 development wells. Its exploratory efforts yielded 5 new oil and gas discoveries in district Khairpur, district Ghotki and district Hyderabad. It also completed major development projects at Uch and KPD-TAY. It was during FY17 that the company's gross crude oil production touched the record level of 50,345 barrels per day.
The Board announced final interim cash dividend of Rs2.00 per share in addition to the cumulative cash dividends of Rs4.00 per share- i.e. a total dividend of Rs6 per share for the year ended 30 June 2017.