OGDC 2QFY22 profit up 87%YoY

Pakistan’s largest oil & gas exploration and production company, Oil & Gas Development Company (OGDC) announced its 2QFY22 profits of Rs35.3 billion (EPS: Rs8.2), up by 87% YoY. Upsurge in profitability was led by maintaining the production levels along with uptick in oil prices and rupee devaluation.

Regarding circular debt resolution, various options are being discussed with the Ministry. However, nothing is finalized yet but company believes positive outcome. Furthermore, talks relating to Term Finance Certificates (TFC) which were issued against the partial settlement of the circular debt back in 2013 remains inconclusive.

Timeline relating to implementation of WACOG bill is not clear. However once it materializes, improvement in the Company’s cash flow is likely to be reflected in 6 months.

The Company has paid Rs1.8 billion of the initial seismic for Abu Dhabi block. Seismic surveys will take 1-2 years and only then management can decide how many wells to drill. To highlight, given the discoveries near the awarded block in Abu Dhabi management is confident of positive outcome.

OGDC has spudded 6 wells (4 exploratory and 2 development). The Company discovered 4 new wells that includes Wali-1 (Kawagarh, Hangu & Lockhart) and Jandran West-1). These discoveries have an expected daily production flow of 39MMCFD of gas and 2,850bbl/day of oil.

The estimated reserves of Wali-1 are 21mn of Barrel Oil Equivalent (BOE) and 191 BCF of gas. To highlight, these are not the proven reserves so in order to estimate the reserves company is going for another 2-3 wells in Wali block and only then the size of the reserve can be evaluated.

In the long term for Wali block the production plan of these development wells will take 2-3 years as the concentration level of gas discovered from this field is 4.2% as against the normalized concentration level of 3%. For this a Gas Processing Facility (GPF) has to be installed.

OGDC is in talks with SNGPL to install 60km pipeline to connect with the grid for which the estimated time is one year and if Sui Northern Gas Pipeline (SNGP) agree for this installation then during the installation of pipeline OGDC will also deploy GPF on these discovered wells.

Management is eyeing on the exploration expense of Rs25 billion for FY22.

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