OGDCL posts net earnings of Rs53.3b in 1QFY23

Pakistan’s largest oil and gas explorer, Oil & Gas Development Company (OGDC), posts net earnings of Rs53.3 billion (EPS Rs12.4) during 1QFY23, up 59% YoY, along with an interim cash dividend of Rs1.75, similar to last year.

However, analysts anticipated higher DPS than last year due to better cash flows, despite the piling up of circular debt.

A sharp improvement in earnings mainly stems from a 48%YoY rise in overall revenues is mainly led by crude oil segment which contributes more than 45% of total revenues.

Exponential growth in revenue is directly linked to a sharp increase in international oil prices (up 41%) and the Pak rupee devaluation against the US dollar (26%).

Moreover, the significant jump in finance & other income to Rs18.5bn versus Rs10.8bn last year also supported bottom-line growth.

Higher interest rates and likely improvement in cash position versus last year led to better income on fixed deposits, we believe.

Moreover, hefty exchange gains on investments/receivables also led to improvement in finance & other income during 1QFY23.

Looking ahead, all eyes will be on the gas sector circular debt resolution as the fate of this mainly relies on a hike in gas prices which the government has already committed to IMF as this will lead to better exploration activities and payout.

The oil and gas sector is also facing around Rs 1.5 trillion in circular debt which is a key threat to the entire energy chain.

OGDCL is a producer of oil and gas.

It also supplies crude oil to the Attock oil refinery and gas to Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC).

SNGPL is facing the main problem of circular debt due to the injection of LNG in the system.

It had been supplying LNG to domestic consumers during the last few winter seasons which resulted in stuck multibillion rupees bills of gas.

At present, there is no mechanism in place to recover the cost of LNG from domestic consumers.

Therefore, it is facing now circular debt issue which compromises its ability to pay bills to gas producers as well.OGDCL Posts Rs 133b Profit in Financial Year 2022