Company profit up 23 percent in FY2018: OGDCL plans ultra-deepwater offshore drilling in January 2019

KARACHI: The Oil and Gas Development Company (OGDC) on Friday said drilling in its ultra-deepwater offshore block is expected to start next year as the company has completed seismic work.

“… work on ultra-deepwater offshore well has been approved and the rig has been arranged, where work will start from January 2019, which will take about 4-5 years to develop,” a senior company official said at analysts briefing.

The briefing as arranged after an announcement of the company’s financial results for the year 2017/18.

Industry officials said a joint venture comprising OGDC, Pakistan Petroleum Limited (PPL), ENI and ExxonMobil, have planned drilling of the first exploratory well Kekra-1 in offshore Indus G-Block with a total investment of $70 million.

Pakistan’s oil and gas sector witnessed a major development recently when the world’s largest energy company ExxonMobil acquired 25 percent stake in Pakistan’s offshore Indus G block. This development could be seen as a major breakthrough as it might lead other international energy firms to bring foreign investment in Pakistan’s energy sector.

Indus G block is approximately 7,500 square kilometres located in ultra-deep water offshore Pakistan. ENI is the operator of the block. OGDCL officials said Tal block pricing case is in the court and the new government is willing to discuss all existing issues.

The issue is expected to be settled in FY19, they said.

OGDCL sees stagnant growth in gas production as “a challenge”.

In the next two years, the OGDC should be able to come up with 150mmcd of gas.

“With natural depletion and incremental gas production, the company will be able to sustain its gas production at current levels going forward,” the company’s official said.

Profit of the company increased 23 percent in the year ended June 30, 2018, compared with the preceding year. This was on the back of higher crude oil prices and growth in sales.

Oil price hike and rupee depreciation lifted profit of Oil and Gas Development Company Limited (OGCL) up a decent 23 percent at Rs78.736 billion during the financial year ended June 30, translating into earnings per share (EPS) of Rs18.31.

OGDCL’s profit amounted to Rs63.803 billion with EPS of Rs14.83, the company said in a filing with the Pakistan Stock Exchange.

The company announced a final cash dividend of Rs2.5/share, taking full-year payout to Rs10/share.

Overall receivables due to circular debt have increased, but at the same time, cash position of the company has strengthened.

Brokerage First Capital Equities Limited said sales jumped 19 percent to Rs205.335 billion in FY2018.

Benchmark Arab Light oil prices advanced 28.4 percent to average $62.3/barrel in FY2018. Rupee depreciated around five percent during the financial year.

Sales increased despite falling hydrocarbon volumes during the year.

“Exploration expense came in at Rs16.19 billion above our forecasted figure of Rs14.94 billion due to recording of a previously-suspended well at Ranipur, while quantum of other income stayed at the previous year’s level,” First Capital Equities said in a flash report.

OGDCL said the company recorded significant increase in seismic efforts and drilling activities during the year. The company paid Rs33.890 billion on the account of taxes.

Analyst Ahsan Arshad at Taurus Securities exploration cost rose 22 percent year-over-year as the company booked 11 dry wells as against four dry wells in the corresponding year.

Analyst Aftab Awan at Sherman Securities said the gross margin of the company improved to 59 percent in FY2018 from 55 percent in FY2017 mainly due to improved oil and gas prices and reduction in operating costs.