AKD Securities Limited - Off the Analyst's Desk.

Karachi -- February 22, 2019 (PPI-OT)

OGDC: 1HFY19 Analyst Briefing Notes

OGDC conducted a conference call following its 1HFY19 results announcement, to recall OGDC reported 1HFY19 NPAT of PkR56.8bn (EPS:PkR13.2) rising 55%YoY on the back of solid growth in sales (up 32%YoY) as a high global crude price environment and PkR depreciation pushed realized prices.

Realized oil price for the period stood at US$62.2/bbl vs. US$48.69/bbl during 1HFY18, while production slipped 1.1%YoY to 40,846bpd.

2%YoY slip in natural gas production as fields underwent gradual depletions.

PkR1.3bn increase in depreciation and PkR0.5bn hike in work-over expense (11 vs. 6 work-overs booked last year), with only one well declared dry vs. 3 in last year.

46/29% of total crude and natural gas produced domestically during the period was by OGDC. Pile up of furnace oil stock has reduced lifting of crude by refineries. This break in lifting of crude (particularly from Nashpa and KPD TAY) have reduced actual production by 1,000bbls.

Extended stop in UCH power plant generation has reduced gas production (closure for 1month and 24 days) where 34mmcfd reduction was due to this break in generation.

Resolution of refinery upliftment and UCH power plant generation would alleviate these concerns, with Dhok Hussain (20mmcf, 400bbl), Bitrisim (28mmcf, 750bbl) amongst others totaling 157mmcf, to be connected to the grid, where SNGP's delays in interconnectivity is the major stumbling block for realizing revenues.

Export of fuel oil, ban on import of RFO and generation on efficient IPPs are options available to the GoP for resolving upliftment bottlenecks.

Developments on the ground in Baluchistan have led to drastic increase in exploratory activity, with exploratory wells in the region to be expected in the medium term.

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