OGDC – highest every quarterly earnings!

The oil and gas exploration and production sector has been enjoying high crude oil prices that have kept the profitability lifted despite weaker production flows. During 9MFY23, the profitability of the Oil and Gas Development Company Limited (PSX: OGDC) increased by 43 percent year-on-year, and that in the latest quarter (3QFY23) stood at 50 percent year-on-year. The growth in earnings for the E&P Company came from the rise in its topline, rise in other income and a moderate growth in exploration and prospecting expenditure. OGDC’s revenues increased by 29 percent year-on-year during the nine-month period. The growth in revenues was driven by 9 percent year-on-year higher average selling price of crude oil as well as over 25 percent rupee depreciation. While the production volumes remained weak.

The topline growth in 3QFY23 was 20 percent year-on-year which was driven continued weakening of the domestic currency against the greenback by 32 percent year-on-year. However, during the 3QFY23, the oil prices declined by 18 percent year-on-year along with continued production decline trend; oil and gas production depicted a fall of 5 and 13 percent year-on-year in 3QFY23.

OGDC witnessed a growth of 12 percent in exploration and prospecting expenditure during 9MFY23 due to the higher cost of dry well. The same increased by 52 percent year-on-year during 3QFY23 due to one dry well and higher seismic activity. Meanwhile, other income in 9MFY23 surged by 120 percent year-on-year due and by over 300 percent in 3QFY23 due to massive exchange gains and higher interest income on cash and cash equivalent.

The oil and gas exploration and production companies had good earnings growth in FY22 due to the depreciation currency and rising crude oil prices. Depreciation of currency has been driving the profitability in FY23 as well. While the concerns for weaker production are less for OGDC as the company’s new discoveries are likely to keep production flows stead in at least the immediate term.