Oil and Gas Development Company Limited (OGDCL), Pakistan’s largest exploration and production (E&P) company, has reported a significant drop in profit for the second quarter of the fiscal year 2025 (2QFY25). For the three-month period ending December 31, 2024, the company posted a profit-after-tax (PAT) of Rs41.44 billion, a decline of over 44% compared to the Rs74.26 billion recorded in the same quarter of the previous year (SPLY).
The sharp decline in OGDCL’s profits is primarily attributed to a combination of decreased sales and higher taxes during the period. Despite facing these challenges, the company remains operationally robust, and its board of directors, in a meeting held on February 28, 2025, reviewed the company’s performance and approved an interim cash dividend of Rs4.05 per share, equivalent to a 40.5% dividend payout. This dividend is in addition to the previously declared interim dividend of Rs3 per share, representing a 30% payout.
Earnings per share (EPS) for 2QFY25 were recorded at Rs9.63, compared to Rs17.27 per share in the same quarter last year, reflecting a notable decrease in profitability. The company’s total net sales amounted to Rs100.4 billion, down nearly 13% from Rs115.2 billion in the same period last year.
Despite the decline in sales, OGDCL managed to improve its profit margin, which rose to 61.3% in 2QFY25, compared to 59.2% in 2QFY24. This improvement in margin, however, was not enough to offset the effects of lower sales and higher taxes.
The company’s gross profit for the period declined by 10%, falling to Rs61.6 billion from Rs68.2 billion in 2QFY24. However, there were some positives within the financial results. OGDCL’s other income surged by over 89%, reaching Rs20.86 billion in 2QFY25, up from Rs11.02 billion in the same quarter of the previous year. This substantial increase was attributed to higher returns from other investments, which partially helped mitigate the impact of lower sales.
On the other hand, exploration and prospecting expenses saw a significant increase of over 68%, indicating rising costs associated with ongoing exploration efforts. Additionally, OGDCL’s share of profit from its associates dropped significantly, with its contribution falling to Rs1.4 billion in 2QFY25 from Rs3.3 billion in the previous year, marking a decrease of over 57%.
Despite these challenges, the company’s profit before tax (PBT) stood at Rs72.7 billion in 2QFY25, showing a marginal increase of 1% compared to Rs72.1 billion in the same period last year. However, a major contributor to the decline in overall profit was the Rs31.3 billion in taxes that the company paid during the period.
OGDCL, which was incorporated on October 23, 1997, under the Companies Ordinance, 1984, is a key player in Pakistan’s oil and gas sector. The company is responsible for the exploration, development, production, and sale of oil and gas, along with related activities that were previously carried out by the Oil and Gas Development Corporation, which was established in 1961.
The company’s continued focus on exploration, despite the challenging financial conditions, underscores its commitment to securing long-term growth and stability. However, with rising costs and fluctuating revenues, the future of OGDCL’s profitability remains closely tied to its ability to manage exploration expenses and navigate the volatile market conditions affecting the energy sector.