A chunky increase in the profits of Oil and Gas Development Company, with first interim dividend of Rs2 per share declared last week, were enough reasons for investors to cheer up and jack up its stock price ever further on Friday.
OGDC’s stock has gained nearly Rs28 or 11 percent in the last four sessions and that’s because when things start positive at the top, chances are that the good fortunes will translate all the way down. Starting FY14 on a healthy note, the firm’s top line posted a healthy growth of 16 percent year on year in the first quarter. This surge in net sales was mainly due to better production, particularly that of crude oil.
This reminds of the changing focus of the oil and gas upstream sector; though the country’s E&P sector has always been gas-heavy, flattering oil price environment coupled with rupee slide have forced the firms to look towards more lucrative options-–crude oil production.
Average net crude oil production by OGDC stood at 40,205 barrels per day, which is an increase on 4.5 percent year-on-year primarily due to commencement of production from company operated fields. Fortunately, gas production followed suit, increasing by 3.6 percent year-on-year.
Not only that, rupee depreciation is always celebrated by oil and gas companies since their revenues are determined in US dollars. Production flows coupled with favourable hydrocarbon prices lifted the firm’s revenues. Average selling price of crude oil sold during 1Q FY13 rose by five percent to $85.7 per barrel, while those of natural gas jumped by nine percent to Rs274.8 versus comparable period of last year.
And with the worse over for some time now (read: circular debt), the injection of Rs56 billion into OGDC by Pakistani government seems to yield its fruits. Beside the revenues, the bottom line of the E&P giant also spurred on account of interest income earned on the TFCs investment.
Expectations about the company for FY14 are upbeat on account of ongoing exploration and appraisal activities. During the first three months of FY14, the company spud one exploratory well and one development well. On the completion of its ongoing exploration and drilling activity, OGDC is expected to add 14,300 barrels per day of oil, 350 mmcf per day of gas and 700 tons per day of LPG to its existing production.
What the investor’s might cherish this year (FY14) is relatively higher dividends in the absence of the circular debt tangle.
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OIL AND GAS DEVELOPMENT COMPANY (OGDC)
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Rs (mn) 1QFY14 1QFY13 YoY
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Sales 62,416 53,795 16%
Gross profit 44,368 38,226 16%
Other income 7,425 2,605 185%
Exploration & prospecting expense 1,955 1,461 34%
PAT 33,588 25,656 31%
EPS (Rs) 7.81 5.97 31%
Gross margin 71.1% 71.1%
Net margin 53.8% 47.7%
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Source: KSE Notice
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