OGDC_All hands on deck, (AKD Daily, Jul 06, 2020
AKD Daily
OGDC:All hands on deck
- News reports highlighting the commencement of production from wells Dhok Hussain and Togh (both in Kohat district) bring the largest domestic E&P firm (50/28% of domestic oil/gas production) back into the limelight, where we re-iterate core catalysts driving our ‘BUY’ call on the stock (TP of 172.2/sh).
- Our forward earnings estimates are underpinned by FY21/22 Arab Light Price estimate of US$40bbl and US$ appreciation of 4.5/4.5% against the PkR, where the fall in market capitalization (down ~18%YoY) extended deviations to crude oil fundamentals with the stock currently trading at an implied oil price of US$~15/bbl — a discount of ~65% from the prevailing crude price bench-mark (Arab Light currently at US$43.1/bbl) vs. LT avg. of ~30%.
- We cover OGDC’s stable success ratios, inroads to meeting planned drilling targets and upcoming LT projects expected to counter depletions and highlight the firm’s relatively frugal exploration efforts, mitigating negative impact from dry wells.
- A dollar denominated top-line provides effective hedging in case of currency devaluation, coupled with substantial room to curtail CAPEX, keeps us comfortable on our payout assumption (37% for F21). We have a BUY call on OGDC with our June’21 NAV based TP of PkR172.2/sh, implying upside of 53% from last close, while the company’s FY21 dividend yield stands at 6.7%, taking total return to ~60%.
Oil and Gas Development Company is a petroleum exploration and production (E&P) company in the Pakistan oil and gas sector. Co.'s principal activity is to explore, develop, produce and sell oil and gas resources and related activities. Co. also manufactures Gas, Liquefied Petroleum Gas, Crude Oil, and Sulphur. Co.'s major fields contributing in the aforesaid production of crude oil include Nashpa, Kunnar/KPD, Pasakhi, Sinjhoro and Rajian and for gas include Qadirpur, Uch, KPD, Nashpa and Dakhni. Co. carries out exploration and development activities on its own as well as in joint ventures with other oil companies.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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