Oil and Gas Development Company Limited (PSX: OGDC) is Pakistan’s largest exploration and production company, engaged in exploration, drilling, production, reservoir management, and engineering support. It holds the most extensive exploration acreage in the country, covering over 40 percent of awarded blocks, giving it a leading role in the development of Pakistan’s oil and gas resources.
OGDC in the recent past – (FY19-FY24)
OGDC has as managed to remain profitable despite structural challenges such as declining production from mature reserves. Its financial performance has moved in line with international oil prices and currency movements, with cost management and exploration results shaping overall earnings.
In FY19, the company’s revenues grew by 27 percent, leading to a 57 percent increase in net profit. This improvement was due to higher realized crude oil and gas prices, while crude oil and gas production levels were flat and LPG production increased modestly. The company drilled 16 wells and reported three discoveries.
Additional support to earnings came from exchange rate gains, higher other income, profit contributions from associates, and lower exploration costs, although rising operating costs, particularly amortization, partly offset these gains.
FY20 reflected a sector-wide downturn due to falling oil prices and COVID-19 disruptions, resulting in a 15 percent decline in net profit.
Revenues were down 6 percent as realized crude oil and LPG prices fell by roughly 20 percent and 11 percent, respectively, while oil, gas, and LPG production volumes declined by about 12 percent, 12 percent, and 11 percent. Higher exploration costs, including dry well expenses, added further pressure on margins.
The sector began to recover in FY21. OGDC’s crude oil production increased by 2.3 percent while gas output fell 2.6 percent. Revenues grew by 2.65 percent, supported by higher gas prices and LPG output, while net profit increased by 9.3 percent due in part to lower exploration costs and fewer dry wells. These gains were offset by reduced other income and higher amortization and repair costs.
In FY22, higher oil prices and currency depreciation boosted revenue by 40 percent, with realized crude oil and gas prices increasing by 62 percent and 14 percent, respectively.
Production of crude oil and gas fell by 4 percent and 5 percent, but exploration costs were down 10 percent on account of fewer dry wells. The company drilled 13 wells, made seven discoveries, and added ten wells to production. Profit before tax rose by 80 percent, while net profit increased 46 percent due to the imposition of a Super Tax.
The following year, earnings rose 68 percent as revenues grew 23 percent amid a 28 percent rupee depreciation. Exploration costs increased 22 percent due to dry wells, while other income doubled because of exchange gains.
In FY24, revenue grew 12 percent despite a 4.3 percent fall in realized crude oil prices and a 6 percent decline in gas production from major fields. Net profit fell by 7 percent as higher operating costs, including rents, taxes, and asset amortization, offset a 5 percent improvement in gross profit.
Exploration costs dropped 34 percent due to fewer dry wells, while drilling activity remained steady with 13 wells spudded and five discoveries made. Non-operating income declined 73 percent due to exchange losses and fewer one-off gains, reducing the net profit margin to 45 percent from 54 percent in FY23.
Recent performance – OGDC in 9MFY25
OGDC reported earnings decline of 24 percent year-on-year in 9MFY25. The decline in profitability was largely driven by an 11 percent fall in net sales reflecting reduced crude oil and gas production (down 4 percent and 8 percent YoY, respectively), a 10 percent drop in crude oil prices, and the appreciation of the Pakistani Rupee against the US Dollar.
Gross profit fell 14 percent year-on-year,and exploration costs surged 73 percent to over Rs14.6 billion, primarily due to three wells being declared dry and higher seismic activity. Other income increased by 45 percent due to higher returns on cash and cash equivalents.
On the operational front, OGDCL maintained its strong market share, contributing around 49 percent of the country’s oil, 28 percent of gas, and 34 percent of LPG production. Average daily net saleable production during 9MFY25 stood at 31,709 barrels of crude oil, down by 4.8 percent year-on-year; 676 MMcf of gas, down by 6 percent year-on-year; and 654 tons of LPG, down by 11 percent year-on-year.
Production was constrained mainly due to forced curtailments by SNGPL and UPL. Nevertheless, the company added eight new wells into the production network and completed 64 workover jobs to arrest natural decline. Four new gas-condensate discoveries—were made, with a combined estimated production potential in fiscal year.
The company continued its diversification initiatives, including its 25 percent equity participation in the Reko Diq copper-gold project, progress on Abu Dhabi Offshore Block-5, and steps towards shale gas and tight gas development. The Board announced a third interim cash dividend of Rs3 per share, bringing total dividends for 9MFY25 to Rs10.05 per share.
Outlook
The outlook for Pakistan’s exploration and production (E&P) sector is improving despite a recent period of production decline. Oil and gas output fell by 12 percent and 8 percent year-on-year, respectively, in FY25, marking the lowest levels in over two decades.
The decline was driven by natural depletion at mature fields and forced production curtailments due to excess RLNG in the system and transmission constraints.
However, structural shifts are underway that are expected to support a medium-term rebound. Gas tariff rationalization has tripled consumer prices since FY23, sharply improving cash flows for E&P companies. This improved liquidity is allowing companies to revive capital expenditure and pursue long-delayed development plans.
Security improvements are also playing a role. The government has provisionally awarded 13 onshore exploration blocks under the 2025 bid round, including three to OGDC, with a focus on Balochistan’s underexplored basins.
From a financial perspective, sector earnings for the full FY25 are expected to fall reflecting lower oil prices and production volumes, but dividend payouts are projected to rise because of improved cash flow positions.