OGDC half yearly profit declines by 12 percent

Pakistan’s largest exploration and production (E&P) company, Oil & Gas Development Company Limited (OGDC) has announced its half yearly (1HFY17) financial results. The Board of Directors also approved payment of one Rupee per share interim dividend. Both the financial results and dividend payout are below expectations.

OGDC has posted net profit of R15.38 billion (EPS: Rs3.58), down 4%YoY while up 5%QoQ. The earnings are lower than with major deviation coming from lower topline, higher operating expenses and exploration costs partially compensated by lower effective tax rate. While the 1HFY17 earnings are down 12%YoY to Rs30.01 billion (EPS: Rs6.98) owing to lower realized gas prices (result of lagged oil price linkage). The earnings are expected to increase onwards due to improvement in realized gas prices and significant addition in flows from KPD-TAY, Sinjhoro and TAL Block.

The major takeaways are:  1) Topline remained flat on quarterly basis at Rs41.52 billion, however, it improved by 5%QoQ owing to improved oil production and higher oil price, 2) operating expenses increased to Rs15.28 billion in 2QFY17, 3) exploration expense increased 33%YoY due to relative differential in dry wells’ expenses, 4) though other income was relatively flat at Rs4.25 billion and 5) tax expenses declined by 27% to Rs4.29 billion due to lower effective tax rate.

OGDC: Income Statement
(Rs million)	2QFY17	2QFY16	YoY	1HFY17	1HFY16	YoY
Net Sales	41,516	41,673	0.0%	81,081	86,186	-6.0%
Royalty	-4,521	-4,680	-3.0%	-8,828	-9,694	-9.0%
Operating expenses	-15,277	-13,934	10.0%	-28,356	-26,568	7.0%
Transportation charges	-426	-401	6.0%	-836	-869	-4.0%
Gross profit	21,291	22,659	-6.0%	43,061	49,055	-12.0%
Other Income	4,248	4,305	-1.0%	9,309	8,295	12.0%
Share of profit	369	246	50.0%	922	615	50.0%
Exploration expense	-3,868	-2,906	33.0%	-8,189	-4,713	74.0%
Admin expense	-925	-897	3.0%	-1,653	-1,812	-9.0%
Finance cost	-412	-408	1.0%	-815	-833	-2.0%
WPPF	-1,035	-1,150	-10.0%	-2,132	-2530.32	-16.0%
PBT	19,668	21,848	-10.0%	40,503	48,076	-16.0%
Tax	-4,291	-5,902	-27.0%	-10,494	-13,870	-24.0%
NPAT	15,377	15,946	-4.0%	30,008	34,206	-12.0%
EPS	3.58	3.71	-4.0%	6.98	7.95	-12.0%
DPS	1.0	1.2	-17.0%	2.5	2.7	-7.0%
ETR	-22.0%	-27.0%	-	-26.0%	-29.0%	-