OGDC earns Rs59b in fiscal 2010

Shareholders have announced that OGDC has earned Rs59.2 billion ($688 million) in net income for the fiscal year 2010.

KARACHI: The Oil and Gas Development Company (OGDC) earned Rs59.2 billion ($688 million) in net income for the fiscal year 2010, according to a statement released by the firm to shareholders on Thursday.

The earnings per share – which is the net income of the company divided by the total number of shares outstanding – for 2010 comes to Rs13.76, which is about 6 per cent higher than the market consensus view of Rs12.98

OGDC’s stock, however, was down 2.02 per cent in trading on the Karachi Stock Exchange on Thursday, closing at Rs138.12 per share. This may be due to the fact that the OGDC announced a final dividend of only Rs1.5 per share, to bring the annual dividend to Rs5.5 per share.

Analyst consensus had predicted a final dividend of around Rs3.1 per share to bring the total dividend for the year to Rs7.1 per share. Nevertheless, the stock is up 53.6 per cent compared to the same period last year.

The earnings growth has come due to an increase in international crude oil prices rather than an increase in volume of oil and gas produced, which has actually declined during fiscal year 2010.

The decline in production comes from the fact that many of the top-producing wells are reaching or beyond their peak production capacity and are now on the decline, which represents a significant long-term problem for OGDC. The company’s management acknowledged the problem.

“The company is fully aware of this trend and is doing its best to maximise recovery through conducting workovers on the producing wells,” said Shah Mahboob Alam, the company’s managing director, in a statement released to the press.

OGDC’s management says that they have also fast-tracked the development of some of their key projects for new oil and gas wells in addition to trying to increase the efficiency of existing wells. During fiscal year 2010, the company discovered 14.1 million barrels of oil in six wells and 161 billion cubic feet of gas.

OGDC is the largest oil and gas exploration company in the country as well as the largest company by market value listed on the Karachi Stock Exchange, with a market capitalisation of around Rs594 billion ($6.91b) as of Thursday’s close. The largest shareholder in the firm is the Government of Pakistan, with approximately 75 per cent share.

The government’s stake has been reduced from 85 per cent during the past year owing to stock options being granted to the company’s 10,000 employees.

The company owns 35 licences to develop oil and gas fields, representing 35 per cent of Pakistan’s proven gas reserves and 46 per cent of all oil reserves. OGDC accounts for 21 per cent of the country’s total natural gas production and 54 per cent of its oil production.

In recent months, there has been considerable discussion among investment bankers and government officials about issuing a $500 million convertible bond on the international markets. Nomura Securities, a Tokyo-based investment bank that is among the largest in Asia, has shown interest in underwriting such an issue but so far the matter remains in the early stages of discussion.

Published in The Express Tribune, August 13^th, 2010.