The Company Overview

Oil and Gas Development Company Limited (OGDCL) was established in 1961 by the Government of Pakistan as Oil and Gas Development Corporation (OGDC). As the name indicates, OGDCL was established to explore and develop oil and gas resources in Pakistan. The Government of Pakistan transformed OGDC into a public limited company in 1997, thus OGDCL, the largest Petroleum and Gas Exploration Company of the country came into being.

OGDCL is listed on all major stock exchanges of Pakistan, i.e. Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE). The company’s Global Depositary shares are also listed on the London Stock Exchange since December 2006. The company’s market capitalization is worth Rs505.79 billion or $6.8 billion. OGDCL is among the volume leaders at Karachi Stock Exchange.

Latest Discovery

In the last week of July, Oil & Gas Development Company (OGDC) announced that the company made gas and condensate discovery in Kunnar South 01, the exploratory well. OGDC operates in Kunnar South Well No 1, which is located in district Tando Allah Yar, Sindh. It is a joint venture between the company and GHPL, where OGDC has working interest of 95 per cent and GHPL holds the rest. This gas and condensate discovery is of some significance in terms of company’s performance, and in turn it will have some impact on the stock as well. Stock analysts predicted that this discovery will drive the earning per share (EPS) of the company for financial year 2008-09. Analysts believe that this increase in the EPS of the company would be in the range of Re 0.06 to 0.08. The company’s paid-up capital is worth Rs 43.01 billion. The Price/Earnings (P/E) ratio is 8.26.

Shareholders may expect another good dividend for the FY 2007-08 even amidst the economic crisis prevailing in the country. Currently the OGDCL’s stock is being traded at the Karachi Stock Exchange at the price of Rs 113.03 (as of August 15, 2008). The company believes in a handsome dividend payout to its shareholders on regular basis, while striking a balance between long-term reinvestment in the business. The following table has been taken from the company’s official website. It gives the investors a complete picture regarding the dividend payout or their return on investment in OGDCL.

Dividend History

When we analyze the above mentioned data, we realized that the return on investment is quite attractive from an investor’s point of view, especially keeping in mind the stability of this stock even in a non-efficient Pakistani stock market. The investors hardly lose their money, as OGDCL tends to maintain its share value quite above the level of Rs 100 per share. The ROI in terms of dividends for the year 2003-04 sums up to be Rs 4 per share.  The same figure for the financial year 2004-05, 2005-06 and 2006-07 was Rs 7.5, Rs 9 and Rs 7 respectively. Although other factors for instance future capex and opex, financial results, capital structure, the debt ratio and the company’s future plans do affect the decision of dividend payout, but such oil and gas discoveries really boost the chances of a healthy dividend for the investors.

Future outlook

OGDCL efficiently follows the business development strategy. The company is looking forward to expanding its E & P business in the overseas markets, mainly through joint ventures with other players of oil and gas exploration and production (E & P) in the international market.

In my opinion, OGDCL is a good stock for the long term investment. Its broad business horizons and attractive dividend payout ratio makes it even one of the best investment opportunities in Pakistani stock market.€