OGDC earnings up 8%QoQ

Oil & Gas Development Company (OGDC) has posted profit after tax of PKR41.0 billion (EPS: PKR9.54), up 8%QoQ for the first quarter, despite lower oil prices (Brent down 8%QoQ).

According to Inter-market Securities, the increase in profitability is attributable to absence of one-off provisions of PKR23 billion booked on TFCs coupled with lower operating cost. It also announced an interim dividend of PKR3.0/ share.

Key highlights from 1QFY25 result:    

Net revenues were down 8%QoQ to PKR106 billion, mainly due to lower oil prices coupled with estimated 4% decline in gas production.

Operating expenses reduced by 27%QoQ to PKR27 billion likely due to lower work-over expensed during the quarter.

Other income surged to PKR26 billion as compared to a loss of PKR3 billion, due to the absence of one-off provisions booked against clearance of TFC in the earlier quarter.

OGDC’s effective tax rate for the quarter rose to 51% during the quarter under review. 

Despite gas curtailment and lower oil prices, OGDC posted decent earnings. Earnings are expected to slightly improve on account of improving gas production.

On production front, the company in a JV with MARI is developing a high-potential asset Shewa in Waziristan block, which has potential reserves of 1.4tcf.

Moreover, the company’s own field Bettani (Wali) is expected to produce 3,000bpd of oil and 35mmcfd of gas, following the successful drilling of Bettani-2 and Bettani Deep-1.    

               

Russia-Iran use national currencies in trade

Iran and Russia have been using national currencies in more than 96% of their mutual payments, the Kremlin’s press service said on the verge of the meeting between presidents of the two countries to be held on the sidelines of the BRICS Summit in Kazan.

"The leadership of both countries pay priority attention to the development of trade and economic ties. Growth of mutual trade in 2023, despite a certain decline, totaled over US$4.0 billion.

We recorded growth of 12.4% as of the end of January - August. The share of national currencies in mutual payments ws over 96%," the press service informed.

Russia and Iran are implementing several large-scale mutual projects in the sphere of transport and energy, the Kremlin said. The North-South international transport corridor project is being developed. Russian-Iranian relations are on the rise, the press service noted.

According to the Islamic Republic of Iran Customs Administration (IRICA), the value of Iran’s non-oil exports to Russia rose 12% in the first six months of the current Iranian calendar year as compared to last year’s first half.

According to the IRICA data, Iran exported 1.3 million tons of commodities worth over US$494 million to Russia in the first half of the current Iranian year.

Non-oil exports to the Russian Federation also increased by 20% in terms of weight.

In the first half of the current Iranian year, foreign transit through Iran from Russia reached 526,000 tons with a growth of 17%, and foreign transit to Russia was 56,000 tons, which decreased by 18%.

The Islamic Republic had exported 2.2 million tons of commodities worth US$965 million to Russia in the previous Iranian calendar year, which also registered a 54% increase in weight and a 28% rise in value.

The main Iranian products exported to Russia in the previous year were fresh or dried pistachios, ordinary non-expandable polystyrene, fresh kiwi and synthetic fibers, and other types of polyester.

Iran and Russia have been taking serious steps to boost their mutual trade over the past few years.

In late January, Iran’s late President Ebrahim Raisi said that the Islamic Republic and Russia have reached an agreement to boost the trade between the two countries up to US$10 billion.

“We agreed to remove trade barriers and boost the economic exchanges between the two countries. Currently, the level of mutual trade is not acceptable, so the two countries agreed to increase trade to US$10 billion a year,” Raisi said on January 21, upon arrival to Tehran after a two-day visit to Moscow.

He also noted that the two sides also discussed monetary and banking issues during his talks with Russian officials.

The two countries also agreed to identify mutual agricultural capacities as well as suitable areas for the exchange of agricultural products in order to increase the level of trade in the agricultural sector, according to the official.

He went on to say that the Islamic Republic of Iran has very good capacities in the field of transit and transportation, saying: “During this visit, it was agreed to activate the north-south corridor. This transit route will make the time and distance of transiting goods from Russia and different northern countries to the southern regions much shorter.”

 

 

Pakistan: 200bps cut in policy rate anticipated

Monetary Policy Committee (MPC) of State Bank of Pakistan (SBP) is scheduled to meet on November 04, 2024 for adjustment in policy rate

According to a poll conducted by Pakistan’s leading brokerage house, Topline Securities, 85% of the participants expect that the central bank will announce a minimum rate cut of 200bps.

Out of these 63% expect the interest rate to be cut by 200bps, 30% expect a cut of 250bps, while 8% anticipate a cut of more than 250bps.

The brokerage house believes that the larger rate cut expectations in the upcoming monetary policy meetings are driven by the single-digit inflation reading of 6.9% in September 2024, which is expected to continue in October 2024 within a range of 6.5% to 7.0%.

Significant fall in YoY inflation in recent months is on the back of faster food disinflation and downward electricity prices adjustments (FCA).

The brokerage house is also of the view that the SBP will announce a rate cut of 200bps, similar to the cut of 200bps in the last monetary policy meeting, taking total cut to 650bps.

This will be 4th consecutive cut of this cycle.

Post this rate cut of 200bps, real interest rates will remain at +860bps, still higher than Pakistan’s historic average of 200-300bps.

In order to absorb any external and budgetary shock, the brokerage house believes, Central bank will continue to keep positive real rate in range of 300 to 400bps in medium terms over forward looking inflation.

6-minth KIBOR and 6-months T-Bills are down 324-359 bps from last MPC meeting.

Falling inflation expectations, the 6M KIBOR and Treasury bills rate are down 324-359bps since last monetary policy meeting on September 12, 2024 and currently hovering at 14.43% and 13.8%, respectively. This also suggest, market participants are expecting a big rate cut in upcoming meetings.

The brokerage house expects policy rate to come down to 13% by Jun 2025 with average inflation expectation of 7%for FY25.

 

Hezbollah confirms Hashem’s martyrdom

Hezbollah announced on Wednesday that Sayyed Hashem Safieddine, the head of the Lebanese resistance movement’s Executive Council, was martyred in an Israeli airstrike on Beirut earlier this month.

“We pledge to our great martyr and his martyred brothers to continue the path of resistance and jihad (struggle) until achieving its goals of freedom and victory,” Hezbollah said in a statement.

The Israeli army said on Tuesday that Safieddine was killed during a strike on October 04, 2024.

Safieddine was widely expected to be formally elected as the next Hezbollah leader after Israel assassinated Sayyed Hassan Nasrallah last month. 

Israel killed Nasrallah, who was the movement’s chief since 1992, in an airstrike on a neighborhood in southern Beirut on September 27, 2024.

US media acknowledged that Israel used American-made 900kg (2,000-pound) bombs in the strike that killed Nasrallah and levelled residential buildings in Beirut’s suburb of Dahieh.

Israel has killed multiple Hezbollah commanders amid the exchanges of fire with the resistance group since October 8, 2023. That is a day after Israel launched its war of genocide in Gaza. Hezbollah has carried out attacks against Israel in a show of solidarity with Palestinians in Gaza.

Israel also launched a massive bombing campaign in Lebanon on September 23 this year and launched a ground incursion into southern Lebanon on October 1.

Israel has killed about 2,500 people in Lebanon since October last year, including 1,800 in the past few weeks.

In response to Israel’s attacks, Hezbollah has intensified its retaliatory operations targeting strategic military sites in Tel Aviv and Haifa.  

The resistance movement’s reprisal strikes have spread a growing sense of panic among Israelis keeping the regime on its toes. 

Saudi Arabia-Iran joint naval exercise

According to the Tehran Times, the head of the Iranian Army Navy has announced that Saudi Arabia has expressed interest in a joint naval exercise, a move aimed at strengthening regional cooperation.

Rear Admiral Shahram Irani highlighted the Iranian Navy's operations in the Red Sea, noting that Saudi Arabia has proposed a combined exercise in that region. Both nations have extended invitations to each other concerning their presence in the ports.

Irani added that both sides' initiatives include plans for a bilateral exercise and potential involvement from other nations. 

“Coordination efforts are currently in progress, and delegations from both countries will engage in necessary discussions regarding the execution of the exercise,” the commander emphasized.

This collaboration between Saudi Arabia and Iran could potentially pave the way for further dialogue and de-escalation of tensions in the region, benefiting both countries and the broader international community.

Military observers from both parties will be attentively assessing the results of this exercise and the possible effects it could have on the geopolitical dynamics of West Asia.

This proposed joint naval exercise in the Red Sea would mark the third instance of military cooperation between Iran and Saudi Arabia in the region.

In 2018, the two nations, alongside Oman and Pakistan, participated in a joint naval exercise in the Indian Ocean under the banner of the "Coalition of Friendship”.

This week, Iran concluded a joint naval drill in its southern waters, with Saudi Arabia among the participating nations.
 

 

Mari Petroleum Company Results Review

Mari Petroleum Company (MARI) held its corporate briefing to discuss FY24 result and future outlook of the company. The key takeaways are:

MARI achieved highest-ever hydrocarbon sales of 39 MMBOE up 18%YoY in FY24.

MARI’s 2C resources increased from 106 MMBOE in FY23 to 112 MMBOE in FY24. Similarly, 2P reserves increased from 577 MMBOE in FY23 to 704 MMBOE in FY24. Ghazij, Shawal, and HRL were the key contributors to the reserves/ resource additions.

MARI’s Reserves to Production (R/P) life is 17 years.

MARI spudded/ delivered a total of 12 wells in FY24, comprising of four exploratory wells (Maiwand X-1, Bolan West-1, Spinwam-1, and Shawal-1); five appraisal wells (4 Ghazij wells (Ghazij-2, 3, 4, & 5) and one Shewa-2; two development wells (Mari-124 and MD-20); and one water disposal well, WDW-3.

The company has also planned drilling for this year, and the CAPEX will be similar to last year.

Phase 1 of the HRL Pressure Enhancement Facilities/ Debottlenecking Project is near completion, with 17 loops completed and 3 loops in progress. Work on the compression stations is also in progress.

Regarding Enhancement Pressure Facilities (EPF) management highlighted that work on SNGPL pipeline has been completed. Pipeline Hydro testing of the remaining section is under process. The commencement of production will depend on the security situation and local dynamics. The expected production will be 70 MMSCFD.

Management highlighted that Mari D&P lease has been renewed for five years until November 2029 with an additional recurring 15% payment of wellhead value.

Mari Mining Company (a wholly owned subsidiary of MARI) was incorporated in July 2023. Currently, MARI holds three mining licenses in Chagai district of Balochistan (MPCL 1, MMC 2).

MARI has also incorporated Mari Technologies Limited, a wholly owned subsidiary company, focusing on Data Centre, Cloud Computing, Artificial Intelligence and other Petroleum and Mining related Technologies.

The management informed that they will sell the bonus shares at market price, and any difference from the price of PKR448.7/ share will be adjusted from the extra 10% shares of the shareholders held by the company.

The key focus of the company would be: 1) the safe startup of Shewa Early Production Facilities, 2) preparation and execution of Ghazij and Shewa FDPs, 3) completion of offshore evaluation and readiness for the bid round, 4) work streams on carbon capture and green hydrogen, 5) diversification in mining and technologies, and 6) building on technical excellence and enhancing employee experience.

 

China cuts key mortgage rate

According to South China Morning Post, China announced on Monday it had slashed a key reference rate for mortgage loans by a quarter of a percentage point, as the country stepped up efforts to stabilize the property market.

The benchmark five-year loan prime rate (LPR) was lowered to 3.6% from 3.85%, while the one-year lending rate was also cut to 3.1% from 3.35%.

For Chinese households with mortgage loans of 1 million yuan (US$140,000), the monthly instalment payment would be reduced by around 141.5 yuan (US$19.9) after the cut to the five-year LPR.

The move was expected as central bank governor Pan Gongsheng had said at a financial forum on Friday that lending rates would decrease by between 20 to 25 basis points.

The rates were last cut in July.

“The rate cut is broadly in line with market expectations,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.

“It is an encouraging sign that the monetary policy is moving in the right direction to fight deflation.”

The move came as Beijing has taken an all-out effort to drive up the struggling property market.

Speaking at a press conference on Thursday, the housing ministry said it would double the credit to white list property projects to 4 trillion yuan by the end of the year and renovate 1 million units in urban villages.

“The monetary policy has clearly shifted to a more supportive stance since the press conference on September 24. The real interest rate in China is too high,” Zhang added.

Analysts expected more rate cuts in the coming quarters, after Pan indicated on Friday plans to further cut the reserve requirement ratio – the amount of cash that commercial banks must hold as reserve – for banks.

“But this is unlikely to boost loan demand much,” said Huang Zichun, an economist at Capital Economics, who noted weak credit demand as the main constraint.

“And without a rebound in inflation, which we don’t foresee, real lending rates will remain restrictive unless policy rates are cut by a lot more.

“The heavy lifting will need to come from fiscal policy.”