Corporate results : OGDCL, POL’s profits slide on declining oil prices

Both companies post lower earnings in 1QFY16

KARACHI: With oil unlikely to rebound anytime soon, companies dependent on its price for their bottom lines continue to struggle with falling profits, despite the high margins involved in the business.

Oil and Gas Development Company Limited (OGDCL) on Friday announced a 35% decline in net profit for the July-September 2015-16 quarter, another indication that difficulties persist with petroleum producers.

Profit came down to Rs18.3 billion from Rs28 billion in the same period of the last fiscal year on lower sale price, which averaged at $50.18 per barrel, according to Arif Habib Limited.

OGDCL, the largest petroleum producer in the country, also saw a decline in gross profit margin which slid to 59% compared to 67% in the same quarter of last year.

There was also a slight decline of 3% in its net profit margin that could have been much more if not for cut in exploration expense, contribution to workers’ profit participation fund and taxation.

The quarter was also tough on OGDCL’s cash position as its reserves dropped to Rs14 billion. The cash and cash equivalent reserve at end of same quarter of last year was Rs51.8 billion.

However, the company still announced a dividend of Rs1.5 per share.

Pakistan Oilfields

The Pakistan Oilfields (POL), which has a higher concentration of oil in its sale’s mix, took an even worse battering as its profit plunged 66% over the comparable period.

The dependence on oil also led to extraordinary drop in its gross margin, which came down to 35.5% in July-September 2015-16 quarter from same period of last year.

If the trend persists, POL would see its lowest gross profit margin, which has already declined over the years.

But compared to the previous quarter, POL also recorded a higher exploration cost.

Published in The Express Tribune, October 17^th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.