Corporate results: OGDC announces sub-par earnings

Profits decline as company intensifies exploration activities.

KARACHI:

The Oil and Gas Development Company Limited (OGDC) announced a 6.3% decline in net profit for fiscal 2012-13 as it recorded higher than expected exploration expenses and tax payments.

Profits for Pakistan’s largest petroleum explorer fell to Rs90.77 billion from previous year’s Rs96.9 billion as it saw exploration activity expense shoot up 272%, according to financial statements sent to Karachi Stock Exchange.

The company announced a final cash dividend of Rs2.75 per share, which translates into full year payout of Rs8.25 per share. Net sales increased 13% to Rs223 billion.



“Earnings per share of Rs21.11 fell well short of street consensus of Rs23-24,” said Shajar Capital. “Though the company’s top-line and other income rose by 13% and 62%, respectively, the increase in exploration cost dampened its profitability.”

Detailed notes to full year financial statement were not immediately available so it is hard to say where exactly the money has been spent.

However, industry officials say the higher expenditure reflects the state-run company’s endeavour to shore up gas supplies as government fights a crippling energy crisis.

OGDC’s effective tax rate also surged to 38% from previous 27% in previous fiscal year.

Global Research said the company’s other income depicted a healthy increase of 62% mainly on due to Rs82 billion TFC issued during first quarter of the financial year. It anticipates the company to have booked Rs8.6bn as interest income on the TFC.

OGDC accounts for 1,108 MMCFD of gas and over 40,000 barrels per day of oil. It has been working on some of the most prospective fields in the country including Kunnar Pasakhi Deep -Tando Allah Yar field in Sindh that has faced repeated delays since 2007.



While a gas price structure, which offers good returns to exploration and production companies, continues to support OGDC’s financial statements, the company has struggled to make any major discovery in the last few years.

Successive changes of the top management and constant political interference has also left the company vulnerable to fiscal leakages, senior officials say. “Cost of producing a barrel of oil is just a few dollars. OGDC being the largest producer can exploit this to its advantage if only someone tries,” said an official who has closely worked with the company in the past.

Published in The Express Tribune, August 7^th, 2013.

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