OGDCL fails to declare dividend for the first time

Company’s net profit falls 14%, result much lower than market expectation.

KARACHI: The Oil and Gas Development Company Limited (OGDCL), the country’s largest oil and gas explorer, for the first time in its history has failed to announce a dividend with its quarterly results, according to analysts.

The company’s dividend payout had been falling over the last two years but this is the first time it has not declared a dividend along with quarterly results, said IGI Securities analyst Umair Siddiqui.

The board of directors did not announce a dividend as they feared a flight of capital to foreign shareholders at a time when the company was facing a cash crunch, said Standard Capital Securities Head of Research Faisal Shahji. Capital flight is when money or assets rapidly flow out of a country.

Almost 80 per cent of the company’s free float in the stock exchange is held by foreigners.

This is a clear indication of the level of liquidity crunch the energy sector is facing due to the circular debt, analysts said. The circular debt has ballooned to Rs150 billion.

The company did not meet most of its well-exploration targets in Sindh and Balochistan because of the cash crunch, added Shahji.

OGDCL announced a much lower-than-expected profit in the quarter ended December 31 due to higher tax payments.

The explorer’s net profit dropped 14 per cent to Rs14.89 billion during October to December 2010, according to a notice sent to the Karachi Stock Exchange on Thursday.

The company’s tax payments went up a whopping 41 per cent to Rs12.14 billion during October to December 2010 compared with Rs8.59 billion in October to December 2009.

The company contributes 23 per cent to the total gas production and 56 per cent to the total oil production of the country.

Net sales flat, production mostly down

Net sales of the company remained flat at Rs41.64 billion compared with Rs40.81 billion in the preceding year’s corresponding period.

Net crude oil production decreased by 4.7 per cent in the first half of fiscal 2011 compared with the corresponding period last year, the company informed in its conference call presentation. LPG production decreased by 2.5 per cent mainly due to a decline in production from Chanda, Kunnar and Dhodak fields, it said.

On the other hand, net gas production increased by 2.3 per cent on a yearly basis. Exploration expenditure fell 71 per cent to Rs1 billion from Rs3.49 billion in 2009 as the company made only two discoveries – Sehar-1 and Chak216 West-1 – against five discoveries in the preceding year.

Published in The Express Tribune, February 25^th, 2011.