KARACHI, Sept 27: Oil and Gas Development Company Limited (OGDCL), the largest oil and gas exploration company in Pakistan, announced on Wednesday results for the year ended June 30, 2004 , which were the first full year financial results following the listing of the company at stock exchanges early this year.
The company posted an eight per cent increase in after tax profit to Rs22.4m, from Rs20.7m the previous year, representing earnings per share (eps) at Rs5.21, up from Rs4.81 in FY03.
The board also recommended final cash dividend at Rs1.25 per share, which was in addition to the Rs2.75 per share interim already paid, making the total cash payout at Rs4.
Analysts did not share a common view on the financial figures and dividend. A sample of eight major brokerage houses had following recommendations to make: Arif Habib Securities (buy); Invest Cap (buy); Global Securities (buy); KASB (neutral); Jahangir Siddiqui Capital Markets (hold); First Capital (hold); Taurus (wait for dips); First National Equities (wait for dips).
On Friday last the 10-rupee share in OGDCL closed at Rs60.30, which placed it on price-to-earnings (p/e) multiple of 11.6 times the FY04 earnings. The share also produced yield of 6.6pc.
OGDCL holds the largest share of hydrocarbon reserves in Pakistan with a 49.7pc share in oil and 37.8pc of gas. On an overall basis, the company commands approximately 39 per of all oil and gas reserves in the country.
Growth in net sales was witnessed at 13.88pc with cumulative total company's net sales and "other operating revenues" surging to Rs51,326m compared with Rs45,008m the previous year.
"Increase in top line can be attributed to both, higher quantities sold and the relatively higher prices of crude oil, gas and LPG compared to the last year," said analysts at Arif Habib Securities.
They said that reports suggested that production from the Chanda field had started from July 17, which was expected to produce 10 mmcfd of gas and 3,000 barrels per day of oil.
Abdul Rasheed, energy sector analyst at Invest Cap, conceded that he was looking forward to eps in the range of Rs5.25 to Rs5.35. A disproportionate growth (eight per cent) in net profit compared to revenue growth at 14pc was stated to be due to an increase in exploration costs.
The analyst noted that (exploration) amortization costs had increased by 50pc to Rs2.0bn from Rs1.4bn due to higher provisioning for 'decommissioning cost'. "It is a non-cash entry for future site restoration liability, under IAS.
Exploration write-offs (for unsuccessful/dry wells) also increased by 34pc to Rs3.4bn because of aggressive capital expenditure plans for FY04. OGDCL drilled eight exploration wells, of which only two proved successful.
Tanvir Abid, research head at Jahangir Siddiqui Capital Markets, observed that growth in profitability in FY04 had resulted from combined effects of higher petroleum and gas prices and enhanced energy output whereby sales rose by 14pc.
The analyst said that OGDCL's ongoing exploration activities depicted by enhanced crude oil and gas production and development of new fields brought significant benefits to the company. "Moreover, petroleum prices during the year maintained a rising trend, ensuing from Opec production cuts, low US inventories, turmoil in the Middle East and speculative interest by hedge funds," Mr Abid said.
Shahab Farooq, analyst at First Capital Securities, stated that higher exploration write-offs were owing to increased exploration and development activities and $26m write-off for its offshore block.
Financial charges recorded a 94pc decrease to Rs38m for the year under review, from Rs647m the last year. The analyst said that for nine months, financial charges stood at around Rs80m, but for all of the year, those declined to Rs38m, which might be the result of some adjustments in payments of prior quarter.
Taurus Securities pointed out that profit before tax for the year under review was actually higher by 15.5pc but because of a higher effective tax rate (26.5pc versus 21.7pc in FY03), after tax profit grew by 8.4pc.
Tanvir Abid observed that by the end of March 2004, OGDCL was operator in 18 exploratory blocks covering over 27,000 sq km and working interest owner in 17 non-operated blocks. "Furthermore, the company operated 35 mining and development and production leases," said the analyst.