OGDC profits rise on lower tax rate

Explorer releases ten-month accounts to fulfill bond issue requirement.

KARACHI:

The country’s largest oil and gas explorer Oil and Gas Development Company’s profits rose 11 per cent in the first ten months of the current financial year primarily due to lower tax rate rather than an increase in drilling operations.

OGDC released its ten month accounts on the London Stock Exchange in order to fulfill the exchangeable bond issue requirements. The government plans to sell up to 10 per cent of its 75 per cent shareholding in OGDCL via exchangeable bond transaction.

The profit growth is mainly attributed to a lower effective tax rate of 27.2% for the period under review against last year’s 37.4%, according to a JS Global Capital research note.

Exploration expenditure dipped 18 per cent to Rs5.4 billion as a result of lower drilling activity this year.

The company’s net profit rose to Rs52.8 billion during July 2010 to April 2011 compared with Rs47.6 billion posted in the same period last year, according to a notice sent to the Karachi Stock Exchange.

The company stock eased Rs0.04 to close at Rs155.96 during trade at the Karachi Stock Exchange on Friday.

Kunnar field pricing change costs explorer billions

The Ministry of Petroleum in a letter issued on April 30 directed OGDC to revise the oil pricing formula for Kunnar and switch it to the formula of Badin-1 including pricing discounts effective from January 2007. Previously, the oil pricing for the field was linked to the pricing formula of Badin-II with no discount being applied.

The revenues of the company took a hit of Rs15.5 billion due to retrospective reversal in revenues taken on account of pricing adjustment.

The company further mentioned that it is contesting the issue with the concerned authorities.

In line with these developments Topline Securities revised their earnings estimate downwards for the explorer to Rs14.9 from Rs15.5 per share.

Other income also slipped to Rs1.9bn against 2.4 billion recorded in the same period last year.

The company’s trade debts have slightly eased to Rs112 billion in April against Rs127.3 billion reported in March 2011, according to the company’s balance sheet.

Published in The Express Tribune, June 18^th, 2011.