OGDC Navigates Challenges with Strategic Shifts and Strong Financial Performance

Karachi: The Oil and Gas Development Company (OGDC) presented its first-quarter financial results for fiscal year 2026 in a briefing that revealed a strategic shift towards higher-risk exploration areas and significant improvements in financial collections. The company also outlined plans for future exploration and gas production amidst ongoing energy sector reforms and government discussions.

The management discussed its recent initiatives, including the completion of a 3D seismic acquisition in Uch and ongoing seismic activity in Bettani. Two wells have already been drilled in Bettani, with the prospects of a third well under evaluation. This marks a move into higher-risk areas as OGDC seeks to expand its exploration footprint.

Significant progress has been made in receivables collection, surpassing 109% of billing. Notably, recovery from Uch reached 177%, SNGPL 104%, and SSGC approximately 90%. The company’s power sector circular debt receivables from Uch currently stand at Rs59 billion, down from Rs89 billion in December 2024. Management expects the remaining balance to be recovered in the second quarter of fiscal year 2026, despite some pending disbursement issues.

Discussions with the government on the gas sector circular debt are ongoing, with a taskforce working towards a comprehensive solution that addresses gas curtailment and RLNG oversupply issues. An agreement has been reached with SNGPL to curtail gas from fields producing only gas, diverting the impact away from crude production. This has led to a reduction in crude curtailment by approximately 1,000 barrels.

OGDC had initially shifted towards oil production to counter the impact of gas curtailment but is now refocusing on enhancing gas production. Management anticipates that gas production will surpass oil production in the coming years, given ongoing energy reforms and discussions with the government. While oil production optimization remains a focus, exploration and new gas discoveries will be prioritized.

In response to a potential permanent allocation of MARI gas to fertilizer plants, OGDC may divert gas supply from KPD-TAY to alternative consumers, including third parties, as the gas from this field is pipeline-quality. The management also expressed optimism about offshore exploration potential, though they acknowledged the time required for materialization.

OGDC maintains a positive outlook on its future prospects, bolstered by its trading position at a FY26E/FY27F PE of 5.8/5.6x. The company announced a third interim cash dividend of Rs2.5 per share, reflecting confidence in its financial stability and growth trajectory.