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Karachi, February 24, 2014 (PPI-OT): The Board of Oil and Gas Development Company Limited (OGDC) is scheduled to meet tomorrow to finalize the company’s IHFYI4 result.
According to AKD Securities, they expect the company to post earnings of PkRBS2bn (EPS: PkRIS15) Compared to earnings of PkR4O.2bn (EPS; PkRII.45) during the corresponding period last year – a growth of 32.4%YoY.
In 2QFY14 alone , AKD Securities expects the company to post earnings of PkR3ISbn EPS: PkR734) premised on i) average 20FY14 Arab Light oil price of US$l1Ol6lbbJ and consequent realized oil price of US$87l4Ibbl, ii) total oil production at 40,l45bpd (including non-operated fields), iii) average gas price of PkR3I5.76!mmbtu (pre heating value adjustment) iv) Gas production at 1O57mmcfd (including non-operated fields, v) Other Income of PkR7.lbn (IHFYI4: PkRI4.5bn) and vi) higher Exploration and Prospecting Expenditure at PkR2.7bn (up 37%QoQ) due to 2-D seismic data acquisition from 3 blocks and 3-D seismic.
Acquisition from 2 blocks during 2QFYI4 as well as spudding of I new exploratory well and 2 new appraisal development wells during the quarter (excluding 3 carryover appraisal wells from 10FY14). Alongside the result, AKD Securities expects 000C to pay a dividend of PkR2/share in 2QFYI4 bringing cumulative IHFVI4 payout to PkR4/share.
Weaker QoQ earnings: 20EY14 earnings are projected to stand at PkR3I.Gbn (EPS: PkR7.34), up 74.6%VoY but down 6.O%QoQ due to slightly over oil and gas production at 40l4Sbpd (1 Q: 40,2O5bpd) and 1 O57mmcfd 10: 1,181 mmcfd), respectively. ii) higher exploration and prospecting expenditure at PkR2.7bn in 2QFV14 compared to PkRI.9bn in IQFYI4 and iii) slightly lower Other Income’ at PkR7lbn compared to PkR74bn in 1Q.
Continuing to explore during 20FY14. Exploration expenditure is expected to increase by 37%QOQ to PkR2Thn (cumulative I -1FY14: PkR4.6bn) due to spudding of 1 new exploratory well (Maru East-I) and 2 new appraisal / development wells (Chak-5 Dini-2 and Qadirpur H-52) in addition to carryover of drilling on 3 appraisal wells from 10.
Total Exploratory and .Appraisal / development wells spud during IH stood at 2 and 6. respectively, while OGOG’s full year well target stands at] Exploratory wells and 12 Appraisal I Development wells. During the quarter, OGDC also acquired 377.3 L.kms cumulative 1 H: 864.3 L.kms) of 2D seismic data and 1 94.7sq.kms of 3D seismic data (cumulative 1 H: 431 .7sq.kms).
Investment Perspective: OGDC has underperformed be broader market by 8.1% over be past 3 months on the back of weakness in international oil price. despite a fantastic 1QFY14 result. Going forward.
AKD Securities believes strong earnings growth expected over the next 3 years on the back of strong volume GAc3R well likely lead to price discovery in the stock- The company’s acquisition Df29 new blocks in the last Petroleum Rights bidding lends credence to the aggressive agenda being pursued byte management- Alongside the result, AKD Securities expects OGDC to declare a dividend of PkR2/share, taking cumulative 1 HFY14 dividend to PkR4lshare. At current levels, AKD Securities has an Accumulate’ stance on OGDG with target price of PkR3O21/share