Oil and Gas Company Limited (OGDC) has posted robust growth in earnings. It has posted profit after tax of PKR123.9 billion (EPS: PKR28.81) for the year ended June 30, 2014 (FY14) as compared to PKR91.7 billion (EPS: PkR21.22) a year ago, translating into growth of 36%YoY. The results are above the market expectation and also accompanied by final dividend of PKR3.0/share which takes full year payout for FY14 to PKR9.25 per share.
During FY14, the Company’s topline grew by 15%YoY owing to enhanced production of hydrocarbons (mainly led by oil). However, increase in operating expenses contained gross profit growth to 11%YoY because gross margins were down by 2ppt to 69% during FY14).
Further support to profitability came from ‘other income’ which rose by 22%YoY to PKR19.1 billion during FY14, the increase primarily attributed to interest earned on PIBs it received as partial settlement of circular debt which took place in June’13. Recall that last year the company expensed out 10 dry wells which escalated its exploration & prospecting costs.
However, in FY14 only 5 dry wells were expensed out, which led to exploration & prospecting cost going down by 42%YoY. Furthermore, due to the absence to higher tax demand by tax authorities in FY14, the company incurred higher effective tax rate in FY13 (38%) which in FY14 has come down to 28%.
In 4QFY14 alone, the company posted net profit of PkR32.9 billion (EPS: PkR7.67) as compared to net income of PkR23.7 billion (EPS: PkR5.51) for 3QFY14, up by 39%QoQ. Despite the topline growing by 4%QoQ, the company’s gross profit declined by 1%QoQ. That said, the major impetus towards the bottomline came from increase in ‘other income’ recorded at PkR4.9 billion in 4QFY14 as compared PkR2.1 billion for the previous quarter.
Another boost to the bottomline was provided by lower effective tax rate, coming down to 22% for 4QFY14 as compared to 40% for 3QFY14. It is believed this was primarily due to 1) higher other income, which is taxed at a lower rate and 2) forex loss due to 7% appreciation of PKR against the US$.
For FY15 the Company has capex plan of PkR80-85 billion as it plans to drill 35 wells out of these 19 will be exploratory, while remaining will be of development type. The Company also plans to ramp up its oil and gas production by 9% and 15%, respectively, during FY15.
Source: KSE Notice |