OGDC 3Q earnings come in at PKR 7.08/sh, beat expectations

Oil & Gas Development Company Limited (OGDC) reported its 3QFY20 earnings earlier today, where Profit after Tax (PAT) came in at PKR 30,466 MN (EPS: PKR 7.08/sh), higher than our expectation of PKR 6.01/sh. The company’s bottomline grew by 17.8% Q/Q, 6.7% Y/Y.

▪ For the 9MFY20 period, the company reported earnings of PKR 83,651 MN or PKR 19.45/sh, lower by 1.9% Y/Y.

▪ Revenues came in at PKR 64,972 MN, slightly lower than our projection of PKR 65,568 MN. The company’s topline contracted by 3.4% Q/Q and 0.3% Y/Y. This was driven by: 1) 5.4% Q/Q dip in oil production; and 2) 16% Q/Q decline in average Arab Light prices during the three-month period.

▪ To recall, the company produced ~ 36,508 BPD of oil and ~1,021 MMCFD of gas during the quarter.

▪ The company skipped cash dividend for the quarter, against our prediction of a PKR 1.50/sh payout. To recall, the company has paid out PKR 4/sh in the first half of the fiscal year.

▪ The company spent PKR 3,077 MN during the quarter on exploration expenses, higher 51% Y/Y, but lower by 52% sequentially.

▪ A boost to earnings came in the form of Other income of PKR 8,787 MN, likely driven by higher-than-anticipated exchange gains for the quarter as the PKR lost 7% of its value against the USD over the course of the three months.

▪ The company’s bottomline was further buoyed by a lower effective tax rate during the three-month period (3QFY20: 31.5% vs. 2QFY20: 33.9%; 3QFY19: 34.0%).

▪ We await quarterly accounts and management discussions for further details on the results.

▪ OGDC is currently trading at 4.50x its FY21 projected earnings, and FY21 P/B of 0.54x. We have an “Outperform” rating on the stock with a TP of PKR 174/sh, representing an upside potential of 83% from current levels.

Annotation 2020 04 27 181328
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