The net revenue of Oil and Gas Development Company (OGDC) for 10MFY11 will stand around Rs18.5 billion if adjustment regarding the pricing revision at Kunnar is not taken into account. The petroleum ministry in a letter issued on April 30, 2011 advised OGDC to revise the oil pricing formula for Kunnar field and switch it to the pricing of Badin-1 (including pricing discounts) effective from January 2007.
Previously, oil pricing for the field was linked to the pricing formula of Badin-II with no discount being applied. The company is pursuing the matter with the ministry to exclude the applicable discounts from the pricing formula. However, as instructed by the Privatisation Commission, OGDC recently released its 10MFY11 reviewed accounts where it posted an EPS of Rs12.28, up 11 percent annually.
For the month of April though, earnings appear to be lower than the average earnings expected for the last quarter mainly due to a downward retrospective adjustment recorded in revenues to the tune of Rs15.5 billion. According to the results, the company posted net profit of Rs52.8 billion (EPS of Rs12.28) against earnings of Rs47.6 billion (EPS Rs11.07) previously, a growth of 11%YoY. Net revenues for the period witnessed a jump of 4%YoY and stood at Rs125.617bn.
Despite this meager top-line growth, the profit growth is mainly attributed to a lower effective tax rate of 27.2% for 10MFY11 versus 37.4% recorded in the corresponding period last year. The growth in the company’s top-line has been restricted mainly on the back of Rs15.5bn retrospective reversal in revenues taken on account of pricing adjustment of Kunnar field.
Operating expense also witnessed a 41 percent in terms of annual growth and settled at Rs27 billion mainly due to higher amortization cost of development and production assets (up 112 percent since last year). Exploration expenditure on the other hand dipped to Rs5.4bn (down 18 percent in the same time frame) as a result of slower drilling activity this year.
Other income too slipped to Rs1.9 billion versus 2.4 billion recorded in 10MFY10. On the balance sheet side, the company’s trade debts have slightly eased to Rs112 billion as of April versus Rs127.3 billion reported as of March 2011 said Umer Ayaz at JS.
