OGDCL in 1QFY18

It continues to be double ‘P’ for Oil and Gas Development Company Limited (PSX: OGDCL) in 1QFY18: The E&P firm’s earnings for the quarter continued to be boosted by ‘Production’ as well as ‘Price’. For the past couple of years, the E&P sector earnings had suffered due to multiyear low prices. However, along with improved oil prices, FY17 saw improved crude oil production flows and increased exploration activity that have boosted the sector’s earning.

Now in 1QFY18, net revenues increased by around 11 percent year-on-year; average basket price of crude oil during these three months stood at $49.60 per barrel, up by 12 percent year-on-year. As a result, OGDCL witnessed higher realized price for crude oil, gas and LPG averaging $45.13 per barrel, Rs252.16 per mcf and Rs45,337 per ton – all up by 14 percent, 4 percent, and 37 percent, respectively.

During the 1QFY18, the production statistics show that OGDCL’s crude oil production stood at 42,529 barrels of oil per day (bpd), which was higher by 5.7 percent year-on-year but lower by 3 percent when compared to FY17 full year average. On the other hand, the firm continued to see a shrink in its daily average for natural gas production flows.

OGDCL presently has a portfolio consisting of 56 owned and operated joint venture exploration licenses in addition to holding working interest in 5 blocks operated by other E&P companies. In 1QFY18, the E&P firm continued with its seismic data activities, spudded two new development wells, and made two new oil and gas discoveries in Sindh, which according to the management’s note possess cumulative daily production potential of around 16 million cubic feet of gas and 72 barrels of oil. OGDCL has also recently inked an agreement with PSO for the supply of 25 to 30 million litres of HSD annually to meet its operational requirements.

Though the firm continued its ambitious exploration efforts, OGDCL’s exploration expenses were significantly down, and this is usually when the E&P firms do not book a dry well. So, the absence of dry or abandoned well expense could explain the drop in exploration costs, which is also another key factor in higher bottom-line for the quarter.