OGDC may go for buying foreign assets worth over $500 million

KARACHI: State-owned Oil and Gas Development Company (OGDC) may acquire an exploration and production firm in Middle East or Africa after the country’s biggest energy firm secured multibillion rupees in bonds maturity, its top official said.

“OGDC is already investing sufficient amount on exploration and development activities within the country,” Zahid Mir, managing director of OGDC told The News.  “We are evaluating several opportunities, which include probable acquisition of a company or bloc abroad in Middle East, Egypt or Africa,” Mir said.  

OGDC has received a sum of Rs53.4 billion against maturity of Pakistan investment bonds, which the company subscribed in July 2012 to settle receivables originating from circular debt. “Now that we have received such a sum, OGDC may go for buying assets abroad worth over $500 million even if found feasible in all respects,” Mir added. “It is only for the board to decide how to use the money.”

MD OGDC said liquidity has never been a problem for the company, which is investing fund as much as possible through the annual exploration budget. Higher numbers of wells are being spud and larger area is being surveyed for seismic recordings. Mir said OMV, a Vienna-headquartered engaged in upstream and downstream businesses, is on sale. The company is also evaluating OMV’s assets for possible acquisition. 

He said OGDC is inclined to acquire a company or bloc abroad to develop its global network yet “when new blocs are offered by the government we would also look into that (opportunity).” 

Analyst Faizan Ahmed at JS Global Capital said strong financial muscle of OGDC helped it sustain its position despite exposure to the circular debt.  “As the company’s balance sheet remains strong (zero debt), we believe that some portion of this cash may be paid out as dividends along with FY17 results,” Ahmed said. 

Presently, OGDC’s overall receivables stand at around $1.5 billion and most of it is receivable from gas utility companies.  

In March 2013, the government offered 50 blocks for grant of exploration licences and most of these were won by OGDC and Pakistan Petroleum Limited. There has been no bidding round since then.

OGDC is looking to bolster growth by acquiring assets on its own outside Pakistan, as apparently no exploration blocks are being offered for bidding in the country at the moment.

Being the market leader in exploration and production sector, OGDC holds the largest acreage, which as of march 31, 2017 stood at 11,604 square kilometers covering 33 percent of the country’s total area under exploration.  OGDC’s exploration acreage spreads across the country and currently comprises of 60 owned and operated exploration licences. The energy firm also possesses working interest in five blocs operated by other companies.

The company posted a net profit of Rs47.595 billion, translating into earnings per share of Rs11.07 for nine months ended March 31, 2017.