OGDCL first half net profit falls 29 percent on weak oil prices

KARACHI: The Oil and Gas Development Company Limited (OGDCL), Pakistan’s largest listed firm, said on Wednesday its first half FY15 net profit fell 29 percent as weak oil prices took a toll.
The company said its net profit for the first six months to December 31 fell to of Rs47.82 billion from Rs67.22 billion the previous year same period.
In a statement to the Karachi Stock Exchange, OGDCL also announced an interim cash dividend of Rs2 a share, bringing the total payment for the first half of current fiscal year to Rs4.5 a share.
Earnings per share came in at Rs11.12/share, compared with Rs15.63/share same period last year.
Net sales decreased by 6 percent to Rs119 billion. “In 2QFY15 alone, company’s net sales decreased by 16 percent to Rs54 billion, compared to Rs64 billion in 2QFY14,” Topline Securities said in its post result report.
The report said during 1HFY15, OGDC’s sales volumes remained flat as oil and gas production improved by 1.5 percent and 0.4 percent respectively, compared to 1HFY14.
“Operating cost increased by 29 percent to Rs26 billion in 1HFY15, versus Rs20 billion in same period last year. We believe the increase in operating costs is due to high prospecting expenditure and amortization costs, along with three dry wells booked during the period under review,” Topline Securities said.
“Net margin declined to 40.3 percent in 1HFY15, compared to 53.3 percent in 1HFY14. Whereas, net margins in 2QFY15 stood at just 36 percent due to higher operating cost, declining oil prices and exchange losses,” it added.
Last year the government scrapped a 10 percent planned sale of shares in OGDCL following lukewarm response from the local and foreign buyers. The government had hoped to raise $815 million from the foreign institutional investors in the form of global depositary shares.
Ahsan Mehanti, an analyst at Arif Habib Corporation, said the company might remain in profit at the end of the year, but it would be affected by declining oil prices. “The problem with the last quarter was soft oil prices, lower profit and an increase in expenses and taxes,” he said.
Mehanti said the company had, however, maintained payout. “On Monday, we may see an increase in the share price,” he said. “Full-year EPS expectation is Rs19 against the last year’s Rs28.”
OGDCL is Pakistan’s largest oil and gas exploration and production (E&P) company. Its primary focus is on natural gas and it holds the largest portfolio of gross recoverable hydrocarbon reserves in the country, at 41 percent of gas and 58 percent of oil reserves as of December 31, 2013.
In FY14, it grew production volumes of natural gas by six percent to 428,249 million standard cubic feet (MMscf) from 404,560MMscf in FY13. Production volume of crude oil grew by three percent to 15,086Mbbl in FY14 as compared to 14,637Mbbl in FY13.
OGDCL has the largest exploration acreage in Pakistan, amounting to 31 percent of the country’s total exploration acreage. This consists of 112,794 square kilometers in OGDCL’s wholly-owned licences and operated joint ventures, and 26,626 sq-km of acreage shares with joint venture partners in OGDCL’s non-operated joint ventures.
OGDCL has 45 operated fields in production, consisting of 21 oil fields, 10 gas fields and 14 gas condensate fields.