Dear Clients,

– Oil & Gas Development Company Limited (OGDC) announced its financial results for 3QFY21 with earnings registered at PKR 24.1bn (EPS of PKR 5.6), in line with street consensus. Earnings are lower as a function of a drop in oil and gas production and higher exploration costs.

– Earnings have improved on a sequential basis by 28% QoQ. We note a dip in profits by 20% YoY. Last year during the same period, OGDC reported profits of PKR 30bn (EPS of PKR 6.98).

-The company announced an interim cash payout of PKR 1.8/sh taking total payout to PKR5.4/sh for 9MFY21.

– Total profitability for 9MFY21 was noted at PKR 66.3bn (EPS of PKR 15.4/sh) lower by 20% YoY compared to PKR 83.1bn (EPS of PKR 19.33/sh) in the same period last year. Revenue for 3QFY21 stood at PKR 65bn up by 5% YoY and 20% QoQ on the back better oil and gas production along with better oil rates. On a cumulative basis, revenues stood at PKR 176.4bn, a reduction of 7% YoY.

– Operating expenses stood at PKR 16.6bn, higher by 6% YoY but flattish on QoQ basis. Royalty expenses saw an 18% QoQ increase. Overall the company recorded gross profits at PKR 41.1bn up by 31% QoQ and 6% YoY. 9MFY21 gross profits stood at PKR 105bn.

-Exploration expenses stood at PKR 5.6bn, in respect of two dry wells recognized during the period.

– Notable decline in other income to 1.6bn, down 85% YoY is attributable to likely exchange losses incurred and lower income from cash balances.

– Going forward, the overhang of planned SPO and circular debt driven cash flow constraints may likely overshadow enhancing profitability on the back of better oil rates and weaker PKR/USD. We have an Outperform stance on the stock trading at a P/E of 5.1x.

Regards,
KASB Research