Oil and Gas Development Company’s (PSX: OGDCL) profits have been up by 22 percent in 1HFY18 and not surprisingly as a result of higher top line. The E&P Company’s revenues for the 1HFY18 were up by 18 percent, year-on-year, led particularly by higher hydrocarbon prices in the first and the second quarter of FY18.
On the average, net realised price of crude oil during the period was $48.69 per barrel, up by around17 percent, year-on-year. Whereas, the average net realised gas price was up by 8.7 percent, year-on-year to Rs253.83 per million cubic feet. However, the volumes witnessed stagnation. Oil flows and gas flows for OGDCL in 1HFY18 were both down by around 3.7 percent, year-on-year to 41,310 barrels per day of crude oil and 1,009 million cubic feet per day of gas in 1HFY18.
The firm’s earnings also benefited from lower exploration and prospecting expenditure due to lower seismic activity during the period and despite higher dry well expense. The company also incurred an increase in the share of profit from the associates due to higher income from Mari Petroleum. However, OGDCL booked lower other income due to maturity of high yield PIBs, which lowered the growth in the bottom-line. However, this has improved the company’s cash position.
OGDCL is more optimistic than its counterparts amid the ongoing E&P sector challenge regarding the amendment in the petroleum policy. Unlike Pakistan Oilfields Limited (PSX: POL), which too has contested the issue in the court, OGDCL continued to record higher prices for fields migrated to Petroleum Policy 2012 and did not reverse retrospective gains for reinstatement of windfall levy on oil revenues. For a revision on what’s the issue read: “E&P sector’s policy issue”, published on February 12, 2018. Apparently, the management is confident that it will win the case against the amendment.
Also, OGDCL is optimistic because it has planned to drill 25 wells in FY18 against 22 wells in FY17. During the 1HFY18, OGDCL reported that it spud 9 wells that consisted of 4 exploratory and 5 development wells, and it made three discoveries as well. The company is hopeful of its ongoing development projects and also plans to invest some local and foreign acquisitions and delve into vertical diversification into the downstream sector.