Oil & Gas Development Company Ltd (OGDC) reported its 2QFY25 earnings earlier today. The company posted a Profit After Tax (PAT) of PkR41.4bn (EPS: PkR9.63) for the quarter, down 44% YoY. The company also announced an interim cash dividend of PkR4.05/sh for the second quarter (payout ratio: 42%).
- The annual decline in profitability was due to i) absence of tax breaks compared to SPLY, ii) lower hydrocarbon production due to supply curtailments, iii) lower average oil prices, and iv) one dry well during the quarter.
- Net Sales stood at PkR100.4bn during 2QFY25, down 13% YoY, largely due to reduced hydrocarbon production alongside lower average oil prices (Arab light: US$75.4/bbl during 2Q, down 14% YoY).
- Regarding hydrocarbon production, OGDC’s estimated oil and gas output fell by 7%/5%YoY, reaching 30.9k bpd of oil and 639mmcfd of gas, respectively.
- Operating expenses for the quarter amounted to PkR27.2bn, marking an 18% year-on-year decline. Additionally, exploration expenses totaled PkR4.0bn for 2QFY25, up 68% year-on-year, as the company incurred a dry well in the 100% owned Thal Block (Kandenwaro-1) during November ’24.
- Finance income surged by 89%YoY, reaching PkR20.9bn, due to company’s substantial cash and investment balances of PkR263bn (up 88%YoY). Additionally, we believe that a second-quarter reversal of provisioning for accrued interest on the mentioned TFCs may have also contributed to the higher finance income.
- Additionally, balance sheet excerpts indicate a strong cash collection ratio of 105% during the second quarter, as the company’s outstanding trade receivables declined by PkR5.3bn on a QoQ basis, marking second consecutive quarter of improvement.
- Effective taxes clocked in at 43% during the quarter, compared to -3%/51% in 2QFY24/1QFY25.
- We reiterate our ‘BUY’ stance on OGDC, with a Dec’25 target price of PkR358/sh and a DY of 7% during the same period.
Courtesy – AKD Research
