Under price pressure, OGDCL profit slips 30%

Earnings stand in at Rs87b in FY15 over Rs123.9b in FY14

KARACHI: Falling crude oil price eroded 29.58% from the annual profit of Oil and Gas Development Company Limited (OGDCL), underlying the exposure of Pakistan’s largest petroleum producer to global uncertainty.

The company announced on Wednesday that its net profit came down to Rs87 billion in fiscal 2015 from Rs123.9 billion it made a year before.

Like other petroleum producers, OGDCL’s fate is closely linked with international crude oil price, used to determine domestic oil and gas rates.

Despite the decline in net profit, the state-run company does not appear to be in any trouble considering that its gross margin was 62%.

While the oil price decline also had consequent impact on the royalties the company pay to the government, there was no drive to cut back on the operational expenses, which rose.

Royalty was down 20% to Rs23.7 billion, indicating the shortfall that government might see in its income sale of natural resources.

OGDCL’s operating expense, which includes the cost of running oil and gas wells, was up 8% to Rs52.9 billion.

The company spent Rs11.6 billion on exploration and prospecting activities, up 33% over the previous year, but this comes to only 5.5% of the revenue. With a steady rise in profits year after year and little push from the government, the company hardly tried to take more risk by spending more on exploration.

Most of the exploration licences it has in the portfolio were taken just last year.

Published in The Express Tribune, August 27^th,  2015.

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