The oil and gas exploration space entered FY26 on a softer note, with sector profitability slipping about 8 percent year-on-year during the first quarter of FY26.
Lower revenues, weaker oil prices, and a sharp drop in other income weighed on results across the board. Oil and Gas Development Company (PSX: OGDC) wasn’t an exception. The company posted 1QFY26 earnings down 7 percent year-on-year.
Even so, OGDC opted to share more with shareholders, increasing its dividend to Rs3.50 per share compared to PKR 3.00 last year.
The topline in 1QFY26 came under pressure, falling 9 percent year-on-year. Oil production dipped slightly, gas volumes fell more noticeably due to ongoing curtailments and realized oil prices were simply lower than the year before.
Arab Light averaged in the low $70s per barrel this time, compared to above $80 last year. Despite these headwinds, OGDC still managed to hold on to a strong gross margin of nearly 59 percent—down, but not dramatically so.
The bigger hit in 1QFY26 came from other income, which dropped more than 50 percent. Last year’s penal income and high TFC returns weren’t repeated, FX movements went against the company, and interest income softened with rates. Exploration expenses offered some relief, coming in lower due to the absence of any dry-well charges. The tax line also eased compared to the unusually high rate booked last year, helping cushion the bottom-line impact.
The company’s corporate briefing shed more light on the road ahead. Management seemed confident about OGDC’s exploration pipeline, especially in higher-risk, higher-reward areas.
What stood out even more was the improvement in collections. OGDC is now recovering more than it bills, and receivables from the power sectorhave come down sharply. The company expects the remaining backlog to clear during the ongoing quarter. Gas-sector circular debt is still a structural drag, but management is encouraged by government-level discussions aimed at fixing pricing, curtailment, and RLNG oversupply issues in a more coordinated way.
There was also clarity on how the company is managing curtailments. An understanding with SNGPL means gas cuts are now applied only to fields producing gas without oil or condensate. And while the company had earlier tried shifting more toward oil, management now believes gas will form a bigger share of its production mix in the coming years, with exploration and new discoveries likely to tilt the balance.
Offshore remains a long game—management is optimistic but realistic about timelines. The potential is significant, but nothing moves quickly in deep-water exploration.
Taken together, OGDC’s 1QFY26 numbers tell a story of softer earnings but healthier signals beneath the surface. Better collections, a more focused exploration push, and a higher payout suggest the company is positioning itself for the medium term rather than reacting to a single quarter.
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