August 16, 2006	Wednesday	Rajab 20, 1427

KARACHI, Aug 15: Oil and Gas Development Company Limited (OGDC) announced its financial results for the year ending June 30, 2006 on Tuesday, posting a profit after tax at Rs46 billion, which represented an improvement of 39.4 per cent over Rs33 billion earned the previous year.

The significance of OGDC -— the oil and gas giant —- is that it is the highest profit earner among all companies in Pakistan; it also is the highest revenue generator for the Government in the form of dividends; the company has the largest market capitalisation base on the stock exchanges and carries the highest (about one-fifth) weightage in the KSE-100 index.

The profit for financial years 2006 and 2005 represented earning per share (eps) at Rs10.69 and Rs7.67, respectively.

The board of directors, which met on Tuesday, also declared a final cash dividend at Rs3.75 per share i.e. 37.5 per cent, which was in addition to the three interim dividends totaling Rs5.25 per share i.e. 52.50 per cent already declared earlier in the financial year ending June 30, 2006, taking the cumulative payout to Rs9 (90 per cent) per share for the year.

Earnings of OGDC for the year under review were generally in line with expectations by various stock brokerage firms that forecasts between Rs10.6 and Rs11.7 in eps. The OGDC stock, which stood as the volume leader in the market with eight million shares traded on Tuesday, declined by Rs1.65 to close at Rs133.25, after touching the highest and lowest at Rs135.75 and Rs133.05, respectively. The share in OGDC contributed 28 points to the overall stock market decline of 89 points on Tuesday.

The combined oil and gas production in FY06 showed a nominal increase of four per cent so that growth in earnings was mainly derived from higher oil and gas prices. Faraz Farooq, analyst at JS Capital Markets, noted that OGDCL derived about 40 per cent of its revenue from oil sales.

Saudi Light oil prices averaged $59 per barrel in FY06, which was 43 per cent higher from last year’s average oil price. Average wellhead price of Qadirpur field (accounting for 39 per cent of total gas production) climbed by 37 per cent to Rs201.4. Due to that, net sales of the company grew by 31.3 per cent to reach Rs96.7 billion, from Rs73.7 billion the earlier year.

Under the head of ‘royalty’, the company paid 34.5 per cent higher sum of Rs10.9 billion, compared to Rs8.1 billion the previous year. Other income of the company, which mainly included interest income, took a big leap of around Rs2 billion to touch Rs4.2 billion from Rs2.3 billion last year. The increase during the latest year reflecting company’s pile of cash balances (Rs38 billion as on March 31, 2006) fetched greater return in rising interest rates scenario.

Jawad Haleem, analyst at Atlas Capital Markets, noted that for the eighth year in succession OGDCL had portrayed higher earnings over the earlier year. He attributed the strong performance to a persistent increase in production and therefore sales coupled with a sharp surge in energy prices on the international front, particularly over the last three years.

For small investors, the OGDC stock has proved both a boon and a bane. Those who subscribed to the government’s divestment of a part of its equity made enormous amount of wealth, which attracted a large number of new investors to the equity market. But it was during the stock market crash of March 2005 that the OGDC stock experienced the biggest plunge from Rs190 to lower than Rs117. Those who burnt their fingers during that crisis still prefer to touch the stock with a pair of tongs.