OGDCL Shares’ Price low: Divestment put on hold

Aftab Ahmed

Islamabad: The Cabinet Committee on Privatization (CCoP) on Friday decided not to proceed with divesting shares of oil and gas development company limited (OGDCL)’s and Pakistan Petroleum Limited (PPL) due to low share price in the market.

Pursuant to the decision of the Cabinet Committee on Privatization (CCoP) dated 21-08-2020, the Privatization Commission intends to undertake divestment of 10% shares in Pakistan Petroleum Limited (PPL) and 7% shares in Oil and Gas Development Company Limited (OGDCL) through a public offering to the foreign and domestic institutional investors, high net-worth individuals and general public through the Pakistan Stock Exchange.

The Ministry of Energy is, however, of the view that both PPL and OGDCL are profitable companies and the current depressed share prices do not reflect the real worth of these Companies. Furthermore, the Privatization Commission should consider the sale to a reputable Exploration & Production company (E&P). In this regard, the Ministry of Energy vide its letter dated 14th February 2020, inter-alia, proposed as under:

The petroleum division said that the current price of OGDCL‘s share was very low being its trading at a very low value. It said that government may not proceed on the ongoing divestment of GoP’s 7% share at this stage.

Moreover, it further pleaded the Privatization Commission to kindly consider that the transaction is structured in a manner that instead of 7% GoP’s shareholding in OGDCL, GoP’s 10% shares in it may be offered to a Strategic Investor Company preferably a well-versed Oil & Gas sector Exploration & Development (E&P) company.

The Ministry understands that it would bring best industry practices and knowledge, state-of-the-art exploration, and production techniques in the larger interest of OGDCL and the E&P sector in Pakistan.

The sale will result in the flow of foreign direct investment in the country.

The strategic sale may also fetch a premium over the market price as usually the sale of large interest to one investor in a profitable company comes with a premium.

The foreign investors’ confidence in the country will enhance after the purchase of interest by a large E&P company. It may also attract foreign investments and technological collaborations in other sectors.

In view of the above considerations, the divestment of shares in PPL and OGDCL at the current share price level is not feasible. Resolution of the circular debt issue, even partially, should help in unlocking the market price of these companies. Thereafter, the strategic sale to a reputable E&P company with its representation through a Director shall be preferred.

The CCoP approved the proposal.