OGDCL – profits gushing

High oil prices along with currency depreciation have been key factors of growth in the revenues of oil and gas exploration and production sector in FY22 so far. Oil and Gad Development Company Limited (PSX: OGDCL) too saw its revenues increasing by 36 percent year-on-year in both 3QFY22 and 9MFY22 where has been benefitting the oil and gas exploration and production sector in Pakistan because of spiking international oil prices amid rising demand as well as geopolitics, and depreciation of local currency significantly contributed to the growth.

The average realized price of crude oil was up by 63 percent in 9MFY22 versus similar period last year. However, the production side has been slipping primarily due to natural decline in fields; crudeoil average daily production was down by four percent year-on-year, while natural gas average daily production was down by two percent year-on-year. Nonetheless, decline in oil and gas production was partially mitigated by injection of eight operated wells by the E&P company.

Apart from the rise in topline, the growth in OGDCL’s bottomline was also due to increase in other income coming from hefty exchange gains from currency depreciation. Finance and interest income grew by more than 5 times in 3QFY22, and by 3.5 times in overall 9MFY22.

On the expenditure side, there was a significant drop of about 50 percent year-on-year in exploration and prospecting expenses in 3QFY22 due to lower cost associated with dry well, and this pulled the overall exploration and prospecting costs down by 10 percent year-on-year in 9MFY22. Also, OGDCL acquired 1,426 Line km of 2D and 120 sq. km of 3D seismic data in9MFY22 versus 2,461 line kilometers of 2D and 387 square kilometers of 3D seismic data in 9MFY21.

Oil prices have continued to drive earnings for the E&P sector and the prices are not coming down. Currency depreciation has been a companion in driving the E&P sector’s earnings. Even though share of profit in associate decline during the period due to the contribution towards PIOL, OGDCL posted robust growth in earnings. The company’s bottomline was seen growing by 79 percent in 3QFY22, and by 69 percent year-on-year in 9MFY22.

The company also announced third interim cash dividend of Rs1.00 per share for FY22 in addition to the first interim cash dividend of Rs1.75 per share and second interim cash dividend of Rs2.00 per share.