Intermarket Pulse: OGDC: Modest estimates revision; reiterate Buy
- We reiterate our Buy stance on OGDC with a TP of PkR191/sh (total return 25%). Following 2QFY17 results, which were slightly below expectations, we have pruned our FY17F/18F EPS estimates by 3% to PkR17.82/22.46, largely due to lower production guidance of KPD-TAY II.
- In 1HFY17, OGDC’s oil production growth has nearly exceeded expectations, even though KPD-TAY II is not yet fully online. Nonetheless, we expect better earnings in the last two quarters as present oil production is touching 50,000bpd level.
- OGDC remains our top pick in the E&P sector, with superior asset base, handsome 3yr earnings CAGR of 20%, right approach to exploration and stability in oil prices. The perceived risk of share oversupply has perhaps deterred price discovery.
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.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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