OGDCL Reports 7% Profit Decline Despite Increased Sales in FY24

The Oil and Gas Development Company Limited (OGDCL) is the largest exploration and production (E&P) company in Pakistan. Recently, it announced its financial results for the fiscal year that ended on June 30, 2024. Despite an increase in sales, OGDCL reported a profit-after-tax (PAT) of Rs208.98 billion, which is a decline of nearly 7% compared to Rs224.62 billion in the same period last year. This news has raised eyebrows among investors and analysts alike, as the company’s performance did not meet market expectations.

During a board meeting held on September 23, the directors reviewed the company’s financial and operational performance. They approved a final cash dividend of Rs4 per share, which is 40% of the share value. This is in addition to an interim cash dividend of Rs6.1 per share, or 61%, that was already paid out. The earnings per share (EPS) for FY24 were recorded at Rs48.59, down from Rs52.23 in the previous year. Analysts had anticipated earnings of Rs49.5 per share, making the actual results even more disappointing.

Topline Securities, a financial services firm, noted that the lower earnings were primarily due to higher-than-expected operational expenses. Interestingly, OGDCL's revenue from contracts with customers increased to Rs463.69 billion, up over 12% from Rs413.59 billion in the previous year. The gross profit also saw a gain of 5%, reaching Rs283.31 billion in FY24, compared to Rs269.73 billion in FY23. However, despite these increases, the company’s profit margin fell to 61.1% from 65.2% in the same period last year.

One of the significant factors contributing to the decline in profit was a staggering drop of over 73% in other income, which fell to Rs41.34 billion in FY24 from Rs154.69 billion in FY23. On a positive note, OGDCL managed to reduce its exploration and prospecting expenses by nearly 34%. However, the cost of finance surged to Rs7.14 billion, a jump of over 51% from Rs4.72 billion in the previous year, largely due to rising interest rates.

In terms of profit from associates, OGDCL reported Rs13.19 billion in FY24, marking an increase of over 25% from Rs10.54 billion in the same period last year. However, the profit before tax saw a significant decrease of over 23%, amounting to Rs293.79 billion. Consequently, the company paid lower taxes of Rs84.81 billion in FY24, down nearly 47% from Rs159.15 billion in the previous year.

OGDCL was established on October 23, 1997, under the Companies Ordinance, 1984, to explore and develop oil and gas resources in Pakistan. The company has played a crucial role in the country’s energy sector, and its financial performance is closely monitored by investors and stakeholders.

In a related development, Burj Modaraba Management Company (BMMC) received approval from the Pakistan Stock Exchange (PSX) to list Burj Clean Energy Modaraba (BCEM) on the Growth Enterprise Market (GEM). This initiative is seen as a significant step for Pakistan’s capital markets, aiming to attract investments in renewable energy projects. The initial offering of BCEM will take place on September 25 and 26, 2024, marking the launch of Pakistan’s first green energy fund.

Meanwhile, Amreli Steels Limited reported massive losses of Rs6.1 billion for the year ending June 30, 2024, amid declining sales and high expenses. The company’s net sales dropped by 15% to Rs38.8 billion, compared to Rs45.5 billion in the previous year. This situation highlights the challenges faced by companies in the current economic climate.

While OGDCL continues to be a key player in Pakistan’s energy sector, the recent financial results indicate a need for strategic adjustments to improve profitability. The decline in profit margins, coupled with rising operational costs, poses significant challenges. As the company navigates these hurdles, stakeholders will be keenly watching its next moves, especially in light of the growing emphasis on renewable energy investments in the country.