Oil and Gas Development Company Limited (OGDC) Earnings Call Transcript & Summary

Hello, and welcome to the conference call of OGDCL Half Year Financial Results for July 2025 to December 2025. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to Muhammad Anas Farook, CFO, to begin today's conference. Thank you.

Thank you very much, [ Francois. ] Good afternoon, ladies and gentlemen, depending on, I guess, where you are. First of all, I would like to apologize on behalf of Mr. Ahmed Hayat Lak, MD and CEO of OGDCL, Lak is not available for this call because some urgent meeting just turned up right now and he had to leave. So he's asked me to take over this particular presentation. So on this particular note, let me just welcome you all to OGDCL's half year financial results announcement conference call. I understand that our Investor Relations team has sent you the presentation already of the results. So let's start on Page 2 of the presentation, where I would like you to go through the legal disclaimer, and I'll take a short pause while you read through the disclaimer. Yes. Ladies and gentlemen, I'm pleased to report that OGDCL's operational financial performance during the first half year -- for the first half year of '25-'26. OGDCL is, as you are aware, is the largest upstream operator in Pakistan. We lead the market with 37% exploration acreage of the total award acreage in Pakistan. As of 30th June 2025, OGDCL held 49% of the country's recoverable reserves and 31% of the country's recoverable gas reserves. In terms of production, OGDCL contributed approximately 50%, 27% and 32% towards country's total oil, natural gas and LPG production, respectively. During the half year '25-'26, OGDCL reported daily net saleable crude oil, gas and LPG production of 31,848 barrels, 626 million scf of gas and 636 million tonnes -- metric tonnes per day of LPG. Currently, OGDCL has a portfolio of 113 D&P leases, of which 81 D&P leases are 100% owned and operated, while 32 are non-operated D&P leases, where we act as non-operators, having joint ventures with foreign as well as local partners. OGDCL's operations, as you must be aware, are spread throughout Pakistan. During the first half, we spud 5 wells, which included 3 exploratory shale wells and 2 development wells. Further, the company made 4 new discoveries. My apologies, it's not a shale, but it's a tight well. So the company made 4 new discoveries. Our remaining 1P and 2P recoverable reserve estimates as of 31st December stood at an impressive 496 million barrels of oil equivalent and 802 million barrels of oil equivalent, respectively. Let's move to Slide 4, which shows a map of OGDCL and shows our leading position with respect to our operations in Pakistan. We hold a diverse portfolio of exploratory assets, which constitute 52 owned and operated joint venture exploration licenses along with holding working interest in 15 blocks operated by other E&P companies. These exploratory licenses are spread across all provinces of the country and represent the largest exploration acreage held by any E&P company in Pakistan. Moving on. If you turn to Slide 5, shows that OGDCL during the first half year registered sales revenue of approximately PKR 192 billion as compared to PKR 206 billion last year. The company's sales declined primarily due to forced curtailment, which amounted to approximately PKR 36.5 billion and also a reduction in the realized crude oil prices as was witnessed in the overall market and the LPG price to approximately USD 56.32 per barrel and for LPG approximately PKR 141,000 per tonne. This reduced from $62.57 per barrel and PKR 168,764 per tonne of LPG. Increase in average realized prices of gas was approximately PKR 30. Right now, the average price of gas stands at PKR 751.52 per million scf as compared to PKR 712 last year. And a slight appreciation of U.S. dollar against Pak rupee also helped us with our financials where the current rupee parity stands at PKR 282 to Pak rupee (sic) [ US dollar ]. During the half year ended 31st December 2025, the operating margin and net profit margin were 41% and 38%, respectively, with an EPS of PKR 16.98. In addition, the Board of Directors recommended a second interim cash dividend of PKR 4.25 per share for the second quarter, which brings the overall dividend for the first half to PKR 7.75, which, as you would be aware, is the highest dividend paid by the company during its history for a half year. Now I'd like to hand over to [ Mr. Sajid, ] who is our -- who is looking after our Exploration Directorate. He will take you through Slide #6.

Good day, ladies and gentlemen. This is Sajid M. Khan. I will be taking you through Slide #6, OGDCL being the national flagship of Pakistan's E&P sector for the largest exploration achieved which as of 31st December 2025 stood at 93,336 square kilometers, representing 37% of country's total area under exploration. The company's exploration portfolio currently comprises 50 owned and operated joint venture exploration licenses. Additionally, the company possesses working interest in 15 exploration blocks operated by other E&P companies. In line with its operational led growth strategy to locate oil and gas reserves for [indiscernible] during this half year, the half year acquired 352 line kilometers of 2D and 170 quare kilometer of 3D seismic data in comparison to 405 line kilometer of 2D and 385 square kilometer of 3D seismic data. During the half year target, the acquired seismic data represent 52% and 22% of total 2D and 3D seismic data acquisition in the country, respectively. Moreover, the company is using in-house resources processed and reprocessed 607 line kilometer 2D and 2013 square kilometer 3D seismic data of various blocks. On the drilling front, OGDCL spud 5 wells, including 3 exploratory wells, [indiscernible] and Katiar-1 and 2 development wells [indiscernible] OGDCL exploration efforts to look at new reserves during the half year under review yielded 4 oil and gas discoveries, namely Chakar-1, V-Sand of Goru Formation in District of Allah Yar, Sindh province [indiscernible] massive and basal sand of Goru Formation [indiscernible] District Khairpur, Sindh province. Baragzai X-1 [indiscernible] formation as well as [indiscernible] in district Kohat, Khyber Pakhtunkhwa Province. The above discoveries have an approximate cumulative daily production potential of 6,655 barrels of oil, 690 barrels of condensate per day and 39 MMcfd of gas per day. Now Mr. Safdar Ali Channa, Head of Production, will take you through the next slide.

Hello, everyone. This is Safdar Ali Channa, and I'm the Head of Production Directorate. I'll explain regarding the Slide #7. OGDCL's production strategy is designed to sustain and maximize hydrocarbons by rapidly integrating new exploratory appraisal and development wells into its network. In response to Pakistan's growing energy demands, the company is employing a state-of-the-art production optimization techniques while expediting ongoing development projects. By leveraging cutting-edge technology and capitalization on new discoveries, OGDCL remains committed to ensuring a steady and sustainable increase in production, reinforcing its role as a key contributor to the nation's energy security. During first half of 2025 and '26, OGDCL has embraced daily net oil and gas production clocked in at 31,848 barrels and 626 million standard cubic feet, respectively, whereas 636 metric tonnes of LPG production was recorded. The company encountered significant challenges due to severe forced gas curtailment leading to periodic and unexpected well shut-ins or shut-downs. This situation had an adverse impact on reservoir performance, particularly affecting aging wells and mature fields. As a result of SNGPL system constraints primarily due to LNG influx and the subsequent need to regulate gas pressures in the distribution network, indigenous gas offtake was curtailed. Consequently, OGDCL recorded a forced curtailment of 28,798 million standard cubic feet of gas, 663,047 barrels of oil and 11,620 metric tonnes of LPG from key fields, including Bettani, Qadirpur, Nashpa, Chanda, Mela, Dhok Hussain and Togh. Similarly, gas curtailment in the Uch field was observed due to the reduced demand from the power sector. Injection of 5 operated wells in the production gathering system that is Jhal Magsi South 1 and 2, [indiscernible] 1, Soghri North 1 and [indiscernible] cumulatively yielded gross crude oil and gas production of 102,463 barrels of oil, 3,177 million standard cubic feet of gas, respectively. Additionally, 255 metric tonnes LPG was also recovered from the gas in order to arrest natural decline and sustained production from natural wells. 43 workover jobs were carried out comprising 10 with rigs and 33 rigless jobs. The rig workover jobs also include installation of 4 number ESP electrical submersible pumps at Rajian 5, Pasahki-11, Pasahki-2 [indiscernible] These efforts with rigs and rigless cumulatively increased the production rate by 4,286 barrels of oil per day, 19.7 million standard cubic feet of gas and 7 metric tonnes of LPG. Pressure build-up surveys were conducted at [indiscernible] Sinjhoro, KPD and TAY and UCH 1 while annual turnarounds were completed at Dakhni, Sinjhoro, KPD and UCH 1. Gentlemen, now please turn to the Slide #8, where I will be giving you the status of development projects. First of all, our Jhal Magsi development project. The project was successfully completed and commissioned in August 2025. Dakhni Compression project, the project was successfully completed in January 2026. UCH compression project. The contract effective time line started from -- after opening of one Supply and Services LC in December 2024. EPCC contractor has completed detailed engineering, design and substantial work. All major equipments have arrived at site and construction work is in progress at site. Project completion time line is June '26. KPD-TAY Compression project. The contract time line started after opening of Foreign Supply and Services LC in December 2024. EPCC contractor has completed detailed engineering and design and substantial work. Partial shipments have arrived at site and remaining are in transit. Field construction work is in progress, where project completion time is April 2026. Bettani development project, its feasibility, basic engineering work and tender documents have been developed. Tender was well advertised and uploaded on OGDCL website and Ariba. Technical bids will be opened on April 8, 2026, and project completion time is December 2027. Sinjhoro Phase 2 Project: Feasibility, detailed engineering and heads-up studies have been completed on this project. Tender documents are developed and are under review. The project completion time line is June 2027. Now I'll ask Mr. Anas Farook, our CFO, to continue with his presentation, please.

Thank you very much, Mr. Channa. Ladies and gents, just move on to Slide #9, where we show a graphical illustration of our financial performance. As you would see, our sales revenue have decreased by approximately 7%. As I've explained before, this was due to forced curtailment in the first half, coupled with the reduction in realized crude prices and lower LPG prices. Our operating expenditure on the other hand, increased by 24% mainly due to higher salaries and wages and some other joint operation expenses, which we've had because we -- although we don't operate some fields which are operated by Mari V to contribute to a healthy share of our expenses to that. So that particular thing was there, resulting in higher operating expenses. Exploration and prospecting expenses increased by 51%, where we had 2 dry wells in the current period as compared to 2 dry wells in the last year also, but the cost of those dry wells was higher in the current year. Further, we had additional seismic acquisition at Sharan and Waziristan which are our non-operated JVs operated by Mari. Also, our own seismic parties, as you would know, are working in the frontier region. So the cost of those seismic expenses are -- have slightly increased. Finance and other income decreased by 42%. That is primarily due to the lower income on investments and banks as the interest rates declined in the market, we saw a reduction. Also last year, we had some late payment surcharge, which was received from Uch, nothing like that in the current quarter. That resulted in reduced finance and other income. The net profit after tax decreased by 11%. I think it's a mixture of all the above explained where the sales revenue reduced, finance and other income reduced, coupled with higher operating expenses. This quarter, there was slightly -- this half, there is slightly lower taxation, primarily because of the fact that last year, at the same time, we had paid approximately PKR 13 billion against the bonus shares, which were issued by Mari to keep our shareholding in Mari and some other well costs, which were higher this year, which are taken as expenses, thus reducing our overall tax outflow. The company registered a profit after tax of PKR 73 billion as compared to PKR 82 billion last year, translating into an EPS of approximately PKR 16.98 as compared to PKR 19.17 last year. Turning on to Slide #10 now. This shows some key financial indicators. I'm sure you can run through them, and you have been able to run through them since the slides have been shared with you. To end this particular call, on behalf of the MD, I would like to thank you all for listening to this and to being part of this analyst call. The company's management remains fully committed to achieving sustained growth in the company's production volumes through strategic initiatives, technological advancements and operational excellence. We are equally committed to expediting any development projects which are in the pipeline, which basically are through planning, innovation and operational efficiencies. Our strategy involved in implementing international best practices to achieve increase in production and to increase. As a result, we are looking at growth in the reserves. This, ladies and gentlemen, concludes our presentation for today. And I thank you all for joining in the conference call. We will now ask the operator to conduct a Q&A session, which we expect to be not more than 15, 20 minutes of duration. After that call, if you have any questions, you can reach us through our Investor Relations team, send them the questions, and we will respond to them expeditiously. Thank you very much.

[Operator Instructions] And the first question today comes from the line of Asil Jalal from Maple Leaf Capital.

My first question pertains to the operating cost. Operating costs to PKR are almost PKR 37 billion in the December quarter, 28% up quarter-on-quarter. Could you clarify the drivers of this sharp increase? Was it due to any one-off adjustments? Or should we expect operating costs to remain elevated going forward? And second question, regarding the recent discoveries in the Baragzai formation, does OGDCL plan to commingle production from the 3 discoveries that you have publicly mentioned? Or will it be -- each interval will be developed and brought online separately?

Thank you very much for the question. So the operating cost is higher this quarter because of primarily because of 2 or 3 reasons, as has been mentioned. The salaries, wages obviously are reflecting -- are reflected in the second quarter where you see a normal increase due to the increments which are normally given. So you saw that particular thing come in, in the second quarter. So that is a normal reflection of how the year goes year-on-year. Besides that, since we've had significant discoveries, the company has granted according to its policies, some compensation to the personnel, and that has also resulted in this thing. Besides that, the joint operating expenses, as I mentioned, in the last year, we had a recovery of insurance from the Tal Block fire. Whereas this year, we don't have such a negative -- basically reduction in costs. So that has actually resulted in a duplicate -- in doubling of the costs as we increase our joint venture expenses in Waziristan. So you would see not exactly the same amount of increase, but some increase, I would say, half-on-half increase as you have seen from quarter 1. The second question was about Baragzai and commingling of gas. The plan initially as of now is to complete in one formation. So we have announced actually 4 formations. Discoveries at 4 formations as of now. And we're working on the fifth formation, DST, which should be finished in approximately a week's time, if I'm not wrong. And once that is done, then we will assess which is the best completion strategy for that. Currently, we will be only doing completing in one formation. Going forward, we are looking at multiple formations since we have ordered some materials which are required for multiple completions. I hope that answers.

We currently have no questions in the queue. [Operator Instructions] The next question comes from the line of Mohammed Iqbal from AWT Investment.

Sir, my question pertains to Reko Diq mine. Sir, there have been reports that Barrick Gold is reevaluating the prospects of Reko Diq project. Could this delay the project?

Is that the only question which you have?

Sir, I have a question -- I have more questions, 2 questions more. that is...

You can ask all then I'll respond. Yes, go ahead.

All right. All right. Sir, there's also a ruling made by the court regarding the super tax. And the super tax is set to be not affecting OGDCL and PPS. So just wanted to hear your thoughts about this.

Any other question?

No, sir.

Okay. So let me just handle the super tax question first. So obviously, as you would know that we -- that there was a ruling made by the federal constitutional court FCC on 27th of Jan, if I'm not wrong. And it allowed supertax -- it allowed the imposition of supertax in all other industries besides oil and gas because they are determined as per the PCAs, which are signed. There is this thing in there where the court, although has not given a long order as such as yet, the short order stated that it will be reviewed under the fifth schedule and in the light of the PCAs by the Commissioner of income tax. So that particular thing is still pending along with the long-term -- long order. So we are looking at those and seeing as to what -- how we handle that particular situation. So in that respect, we have given a disclosure on accounts. And we have not reversed any provision as far as super tax is concerned, being prudent in our approach. As far as the Reko Diq Barrick Gold reevaluating -- evaluating is concerned, I think the statement itself said that because of the security situations, they are looking at the cost and the cost, the security and the time scale of the project. As you are aware that the project was expected to start in the year '28, '29, first production. And that still remains the plan. The project is ongoing. The project is -- does not mean -- the security evaluation does not mean that the project is not ongoing. We have ordered -- recently we have awarded some very large contracts for Reko Diq for various structural and steel works. So we continue to invest in the project. We means Barrick and the Pakistani partners. And to just give you a perspective, in the couple of months which we have had in this financial year, we have invested approximately $75 million on the PMPL level, that means OGDCL has invested $24.75 million in January and February. And if you compare that with the overall structure, we would have invested approximately not less than $350 million, the overall consortium. So work continues. Yes, there is a security situation, yes, which has to be reviewed. It's being worked on with the relevant parties, relevant stakeholders, and we continue to do that. So as far as we are concerned, we are still on the time as we had mentioned earlier.

We have no further questions. So I hand back over to you for closing remarks.

Thank you very much all for attending the conference. We look forward to talking to you and seeing you soon. Thank you very much.

Thank you for joining today's call. You may now disconnect your lines.