OGDCL – FY11 reported EPS to clock in at PKR15.07, up 1 0%

OGDCL FY11 EPS expected at PKR15.07: OGDCL is scheduled to announce its annual results for FY11 on August 12. We expect the OGDCL to post FY11 earnings at PKR64.8bn (EPS: PKR15.07), up 10% YoY. We also expect a final DPS of PKR2.0, taking full year DPS to PKR5.0. 4QFY11 EPS is expected at PKR3.64, down 11% QoQ, due to downward adjustment in revenues on account of retrospective amendment in Kunnar COSA.

Wellhead prices to drive YoY growth amid flattish volumes: Volume front remained un-exciting for OGDCL with FY11 oil volumes likely to fall 1.8% where as gas volumes will likely rise by 1.9% YoY. However, for 4QFY11 oil and gas volumes shall rise 3.7% and 2.6% YoY respectively. As such, growth in wellhead prices shall be the key earnings driver for FY11.

Higher amortization cost and impairment to push opex up 37% YoY: OGDCL’s April-11 accounts unveiled amortization cost of PKR4.7bn (9M: PKR5.3bn) along with PKR800mn impairment on development asset. We expect amortization cost to normalize during May-Jun’ 11 and expect 4Q operating expenses to rise 61% YoY pushing full year opex to PKR32.5bn, up 37%.

Spike in exploration cost in 4QFY11: Exploration cost would likely rise 3.2x QoQ to PKR2.8bn during 4QFY11, 40% of full year expense, as both 2D and 3D seismic acquisition doubled QoQ while two dry wells were expensed during the quarter. Full year exploration cost at PKR7.0bn would still be 11% lower on YoY basis for OGDCL.

EPS revision: We have revised our FY12-13 EPS estimates by 6-8% owing to higher expected flows from Tal block. We have also upgraded our stance to BUY on OGDCL on recent correction in stock price.

Elixir Securities

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