OGDCL suffers, reports Rs16 billion profit

Company CEO says declining crude prices dented earnings

KARACHI: Amid the slump in international crude oil prices, the Oil & Gas Development Company Limited (OGDCL) saw its net earnings decline by almost one-fifth to Rs16 billion in October-December quarter of 2015, the company’s financial results revealed on Tuesday.

The country’s largest publicly listed company based on market capitalisation (Rs451 billion or $4.3 billion in today’s exchange rates), OGDCL reported a net profit of Rs15.9 billion or Rs3.71 per share for the quarter ended December 31, 2015, down 18% compared to Rs19.5 billion or Rs4.54 per share it earned in the same quarter of the previous year.



In the second half of 2015, the company witnessed two oil and gas discoveries, its Managing Director and Chief Executive Officer Zahid Mir said. “However, the continuing slump in international crude prices negatively impacted OGDCL’s financial performance; a trend witnessed across the entire E&P [exploration and production] industry,” he added.

The average basket price, in the second half of 2015, plummeted to $47.73 from $91.86 of the corresponding period of last year, the company said in a notice to the Pakistan Stock Exchange. As a result, OGDCL’ average realised prices decreased to $43.09 per barrel during the review period compared to $76.57 per barrel of the comparable period of 2014.

Following the result announcement, OGDCL’s share price decreased by Rs0.78 or 0.74% compared to Rs104.89 of the previous day and closed at Rs104.11 at the end of market on Tuesday with 7,532,900 shares changing hands - the company’s highest turnover for the month.

“The result was below market expectations,” Taurus Securities’ Head of Research Zeeshan Afzal said, attributing the decline in the company’s net earnings to lower oil and gas flows, which dented sales revenues, and fall in international petroleum prices, which hurt the profit margin.

Besides lower average oil prices, a 3% to 4% slowdown in the production also had an adverse impact on the company’s revenues, BMA Capital said in its report.

The local E&P giant, which has 3.9% weight in the benchmark KSE-100 Index and constitutes over 40% of the listed Oil & Gas Sector, reported Rs41.8 billion in revenues during the fourth quarter of 2015, a decrease of 23% compared to Rs54.2 billion it earned in sales during the corresponding period of 2014.

The index heavyweight is highly vulnerable to fluctuations in international crude oil prices thus, the recent slump in prices reduced its gross profit margin to 54.4% in the last quarter of 2015, down by 10 percentage points from 64.2% of the same quarter of 2014.

However, there are chances that the recent slump in oil prices may be dealt with by major oil producers.

Giving an outlook for the next quarter, Afzal, said Saudi Arabia and Russia - the largest and second largest oil producers respectively - along with Qatar and Venezuela have announced to freeze oil output to January levels to counter the slump and achieve price stability. “If that happens, it will positively impact OGDCL,” he said.

Published in The Express Tribune, February 17^th,  2016.

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