Oil and Gas Development Company (OGDC) held its Analyst Call today to discuss 1QFY26 financial results and future outlook, according to a report released by Topline Pakistan Research. The management highlighted that the company is moving into higher-risk areas. The 3D seismic acquisition in Uch has recently been completed, while seismic activity in Bettani is also ongoing. The company has already drilled two wells in Bettani and is evaluating the prospects for a potential third well.

Management noted a substantial improvement in receivables collection, now exceeding 109% of billing. Specifically, recovery from Uch stands at 177%, SNGPL at 104%, while SSGC is at around 90%.

The power sector circular debt receivables (UCR) for the company currently stand at Rs 59 billion, compared to Rs 89 billion in December 2024. While management noted a few pending issues in the disbursement process, they expect the remaining balance to be recovered within 2QFY26.

Regarding the gas sector’s circular debt situation, management indicated that discussions with the government are ongoing. The task force is working toward a holistic solution that also addresses the gas curtailment and RLNG oversupply issues.

OGDC has agreed with SNGPL to curtail gas from fields that only produce and do not yield oil/condensate. As a result, the curtailment previously impacting Nashpa has been diverted to other gas-producing fields, which, according to management, has reduced crude curtailment by approximately 10,000 barrels.

The company had initially attempted to pivot towards oil production to mitigate the impact of gas curtailment; however, it is now shifting its focus back to enhancing its production capabilities.

Management believes that, with ongoing energy reforms and government discussions, gas production is likely to surpass oil in the next few years. While the focus on oil remains on production optimization, the company will primarily focus on exploration and new gas discoveries going forward.

In the event of a permanent allocation of MARI gas to fertilizer plants, OGDC may consider diverting gas supply from KPD-TAY to alternative consumers, including third parties, given that the gas from this field is of pipeline quality.

Management remains positive on the offshore exploration potential, although they acknowledge that any materialization will likely take time.

We maintain our BUY stance on OGDC. The company is currently trading at an FY26E/FY27F PE of 5.8/5.6x..The bank also announced a third interim cash dividend of Rs 2.55/share.