OGDC remains robust

The domestic oil and gas E&P sector’s financials have been benefiting from not only the higher crude oil prices, but also depreciation of Rupee against USD. This continues to be the key drivers for growth in Oil and Gas Development Company‘s (PSX: OGDCL) earnings for 9MFY19.

The oil and gas E&P giant announced its financial performance for the latest quarter and 9MFY19 last week where the firm saw its revenues grow by 30 percent year-on-year in 9MFY19, and by 26 percent, year-on-year in 3QFY19. The increase in revenues has come largely from increase in crude oil prices and the currency depreciation as the production volumes of oil and gas remained stagnant. The average realised prices of crude oil stood at $59.07 per barrel, up by over 14 percent, year-on-year; and the average realised prices of natural gas stood at Rs326.59 per mcf – up by 28 percent year-on-year. On the production side, crude oil and natural gas average daily volumetric flows in 9MFY19 both stood down by around 1 percent, year-on-year. On the other hand, LPG volumes increased by around 20 percent in the nine-month period. Hence the growth in OGDCL’s top-line came from higher global crude oil prices and the currency depreciation that pushed the average realised prices.

The expense side also did its work in lifting the earnings for OGDCL. Where the operating expenses that account for over 20 percent of net sales remained subdued, exploration and prospecting expenditure came down significantly primarily because of only one dry well in the period versus two in similar period last year. 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 9MFY19, and 42 percent for 3QFY19, on a year-on-year basis. It spuds 11 wells comprising 6 exploratory wells, and 5 development wells in 9MFY19. The company was able to make two oil and gas discoveries in the KPK province. OGDCL has also ventured into offshore drilling along with PPL, ENI and ExxonMobil. It announced an interim cash dividend of Rs2.75 per share for the year ending 30 June 2019 in addition to Rs5.75 per share already declared during the fiscal year.