OGDC – A weaker 3Q

The largest E&P in the country announced its financial performance for 3QFY24 recently where earnings were seen slipping by 26 percent year-on-year. However, in the overall 9MFY24, Oil and Gas Development Company Limited (PSX: OGDC) posted a growth of around 7 percent year-on-year. The growth in the company’s earnings for 9MFY24 was primarily due to the 2QFY24 where growth in the bottomline stemming from tax reversal of around Rs28 billion due to the favorable verdict by the SC related to depletion allowance. On the other hand, the company’s latest quarter (3QFY24) is seen posting a decline in earnings.

A look at the topline of the company shows that the revenue growth was around 12.6 percent year-on-year in 9MFY24, while that in 3QFY24 was 6.5 percent. The growth in revenues in 9MFY24 was due to a two percent year-on-year much needed rise in oil production, and domestic currency depreciation against USD by around 17 percent year-on-year. In 3QFY24, the net sales were led by around 5 percent rise in oil production and a slight rise in oil prices as well.

Overall, in 9MFY24, the average realized prices of crude oil were down by 8 percent year-on-year, while natural gas prices were higher by 21 percent year-on-year.

On the expense side, OGDC incurred higher operating expenses on account of rent, fee and taxes including the 15 percent of wellhead value payment on renewal of leases beyond 30 years; higher salaries, wages and benefits and amortization of development and production assets. Moreover, exchange loss coupled with increase in unallocated expenses of technical services and finance cost also impacted financials However, exploration and prospecting expenditure was lower due to the lower number of dry wells during the period vis-a-vis last year. The growth in finance income in 9MFY24 was also negative due to the absence of exchange gains.