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OGDC_CY23_Analyst_Briefing_takeaways_,(AKD_Off_the_Analyst's_Desk_Feb_27,_2024)

OGDC_CY23_Analyst_Briefing_takeaways

Oil & Gas Development Company Ltd (OGDC) held its analyst briefing earlier today, where-in the management discussed the following:

• Net sales during the half year clocked in at PkR235bn, up 16%YoY, majorly due to higher wellhead prices during the period. To note, average realized prices for crude oil stood at US$69.78/bbl (down 11.2%YoY), while realized gas prices stood at PkR711.9/MMTBU (up 25%YoY). Production activity during the half year stood as follows: 32,984bpd of crude oil (down 0.2%YoY), 716MMcfd of natural gas (down 7.2%YoY) and 724 TPD of LPG (down 0.8%YoY), respectively.
• Company operated in 50 Exploration Blocks (22 blocks with full ownership and 28 blocks as operated JVs), covering an area of 91.8k sq. km as at Dec’23. On the drilling front, company spud total of 5 wells, with two being exploratory wells and three developmental. This consequently led to two gas/condensate discoveries during the half year: Chak-214 and Dars West-2.
• With regards to 2D/3D seismic activities, company conducted 652/262 sq. kms of surveys during the half year.
• The Khewari Development project was commissioned in Oct’23, expecting to yield additional 9.9MMCFD (sale gas and permeate gas). Regarding KPD-TAY compression project, it has recently entered the construction phase and is anticipated to be completed within 18 months.
• Management anticipates capex of PkR35bn in exploration/development projects during 2HFY24.
• Opex was on the higher side during the half year, with the primary reason being the lease expiry of three major fields.  This led to additional payments to the GoP in form of an incremental charge of 15% of wellhead value.
• The E&P industry (along with the company) was granted a one-time reversal of the provision for depletion allowance following a Supreme Court ruling in favor of the participants. This led to reversal in taxation charges which effectively resulted in a positive EPS impact of PkR6.0/sh during the quarter.
• Regarding stake in the Reko Diq mining project, company has made no commitments concerning the divestment of its stake. OGDC remains committed to fulfilling its financing obligations as agreed under the project terms.
• With regards to the Abu Dhabi offshore block (PIOL), development plans to the Abu Dhabi Development Council have been submitted. The consortium has engaged an offshore drilling rig and expects drilling of four wells by Mar’24 onwards.
• In light of the recently increased consumer gas prices, management acknowledged that this could lead to improved receivables collection. However, the impact is expected to be observed over time, possibly post March/April'24.
• Drilling of Bettani Deep is underway and is expected to be completed by early July/Aug'24. The field is in a hilly terrain, hence drilling remains challenging.
• Management stated that GoP is looking to reduce the industry’s gas circular debt, and the clearance of LPS on the company's TFC assets is part of it. However, management hasn’t been communicated anything regarding this plan by the authorities.