BRIEF HISTORY

Oil and Gas Development Company Limited (OGDCL) was initially created under an Ordinance in
1961, as public sector Corporation which subsequently in pursuance of the Petroleum Policy, 1994 was
converted from a statutory Corporation into a public limited joint stock Company on commercial lines
w.e.f 23 October, 1997.
On conversion all the properties, rights, assets, obligations and liabilities of the Oil and Gas
Development Corporation (OGDC) were vested in the Company for having issued ordinary fully paid
shares of Rs. 10/- each against the capital contribution made by the Government. Company's Board of
Directors was reconstituted by nominating experts in different fields on its Board. In April/May 1999,
Government of Pakistan approved privatization of OGDCL and a Financial Advisor was appointed for
the purpose. In October 2006 Government of Pakistan further decided to disinvest part of its
shareholding in the Company after issuing bonus shares at three shares per one share. Initially 2.5% of
the equity with an additional green-shoe option up to 2.5% of equity was offered to general public
under IPO (Initial Public Offering).
The authorized share capital of OGDCL is Rs. 50 billion. The issued, subscribed and paid-up capital is
Rs. 43.009 billion of which 5% is held by the general public and the rest is owned by the Government
of Pakistan. OGDCL is the largest and most profitable oil company of Pakistan. The companys head
office is located in Islamabad. The Company is now listed on all the three Stock Exchanges of Pakistan
with highest market capitalization

INTRODUCTION:
OIL & GAS DEVELOPMENT COMPANY LIMITED (OGDCL) is the largest exploration &
production (E&P) company in Pakistan, listed on all three stock exchanges of Pakistan as well as on the
London stock exchange.
OGDCL was initially created under an Ordinance in 1961 as a Public Sector Corporation which
subsequently in pursuance of the Petroleum Policy 1994 was converted from a statutory corporation
into a public limited company w.e.f 23 October 1997. The Government of Pakistan owns 74.97% of the
shares of the company.
OGDCL is the local market leader in terms of acreage, reserves and oil & gas production. Guided by its
vision and mission and equipped with its strategic objectives, robust debt-free balance sheet and a
dedicated professional workforce, the company is well positioned to deliver upstream growth and
improved profit margins maximizing shareholders wealth while contributing to the wellbeing of the
communities where it operates.

PRODUCT LINES
The main product lines of the company are as under:
1.
2.
3.
4.
5.
6.
7.
8.

Crude Oil
Gas
Liquefied Petroleum Gas (LPG)
Naphtha
Solvent Oil
Kerosene Oil
High Speed Diesel Oil
Sulphur

Highlights of the Year

Crude Oil Production 41,330
Barrels per day

Gas Production
1,173
MMcf per day

Operational Highlights
Two (2) oil/condensate and gas discoveries namely Saand-1 and Maru East-1
Crude oil production on working interest basis averaged 41,330 barrels per day
Gas production on working interest basis averaged 1,173 MMcf per day
Seismic data acquisition of 1,807 Line km of 2D and 867 sq. km of 3D
Seventeen (17) new wells spud including eight (8) exploratory/appraisal wells and nine (9)
development wells
Two (2) new rigs purchased making a total of ten (10) OGDCL owned rigs

Commencement of production from:

Nashpa-4; daily production of 5,900 barrels of crude oil and 20 MMcf of gas
Jakhro-1; daily production of 300 barrels of crude oil and 4.5 MMcf of gas
Maru-Reti Gas Field; daily production of 12 MMcf of gas
Dachrapur-1; daily production of 7.5 MMcf of gas
Rajian-7; daily production of 340 barrels of crude oil
Chak-5 Dim South-2; daily production of 335 barrels of crude oil and 3.5 MMcf of gas

Sales Revenue
257.0
Rs in billion

Profit for the year

123.9
Rs in billion
Financial Highlights

Sales revenue increased by 15.1% to Rs 257.0 billion (2012-13: Rs 223.4 billion)

Net realized prices of crude oil and gas averaged US$ 87.71/barrel and Rs 282.95/Mcf
respectively (2012-13: US$ 83.40/barrel and Rs 265.88/Mcf)
Profit for the year rose by 35.8% to Rs 123.9 billion (2012-13: Rs 91.3 billion)
Earnings per share for the year Rs 28.81 (2012-13: Rs 21.22)
Total cumulative dividend declared Rs 9.25 per share (2012-13: Rs 8.25 per share)
Total assets increased to Rs 496.2 billion from Rs 413.9 billion
Contribution to national exchequer Rs 132.3 billion (2012-13: Rs 129.6 billion)

SNAPSHOT
FINANCIALS

Vision
To be a leading multinational Exploration and Production company.

Mission
To become the leading provider of oil and gas to the Country by increasing exploration and production both
domestically and internationally, utilizing all options including strategic alliances;
To continuously realign ourselves to meet the expectations of our stakeholders through best management
practices, the use of latest technology and innovation for sustainable growth while being socially
responsible

Core Values

Merit
Teamwork
Dedication
Integrity
Safety

KEY GOALS
Financial
Build strategic reserves for future growth/expansion
Growth and superior returns to all stakeholders
Double the value of the Company in the next five (5) years
Make investment decisions by ranking projects on the basis of best economic indicators
Maximize profits by investing surplus funds in profitable avenues
Reduce cost and time overruns to improve performance results
Learning and Growth
Motivate our workforce and enhance their technical, managerial and business skills through modern
HR practices
Acquire, learn and apply state-of-the-art technology
Emphasize organizational learning and research through effective use of knowledge management
systems
Fill the competency gap within the organization by attracting and retaining best professionals
Attain full autonomy in financial and decision making matters
Customers
Continuously improve quality of service and responsiveness to maintain a satisfied customer base
Improve reliability and efficiency of supply to the customer
Be a responsible corporate citizen
Internal Process
Evolve consensus through consultative process interlinking activities of all departments
Excel in exploration, development and commercialization
Be transparent in all business transactions
Synergize through effective business practices and teamwork
Have well-defined SOPs with specific ownerships and accountabilities
Improve internal controls
Improve internal business decision making and strategic planning through state-of-the-art
Management Information System
Periodic business process reengineering

SWOT Analysis:
SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of
strategic planning and helps managers to focus on key issues. SWOT analysis of OGDCL is referred
below:

Strengths:

Joint Ventures with Foreign Oil Companies working in Pakistan.

High Market capital & Revenue.
Largest Oil and Gas company in the Pakistan.
Monopoly of the company and having confidence due to government Support.
Dynamic & strong Financial Position due to above 45 years of experience.
Best locations of business which they select after long process.
Large number of field of oil and gas.
Experienced and Technical staff involving no. of expert Geologist.
35 % Profit increased in the year 2014 as compared to previous year
Current assets are four times high than current liabilities
Current ratio of the OGDCL is around 4% which is very good
Earning per sharing of the OGDCL is increasing from previous year.
Market price per share also increased from previous year
Breakup value per share also increased from previous year
Profit also increased from previous year

Weaknesses:

Political Influences
Weak Management
slow promotion process
No concept of Diversification like other oil companies.
Cash to current liability ratio is lower.
Current liabilities is very much increased in the current year as compare to past five years

Opportunities:

Expansion towards a multinational company

Having developing market industry
can be move into new market segments that offer improved profits
Baluchistan exploration and off shore drilling
Massive consumer market
Government incentives to Energy Sector for doing better projects
There is no tough competition faced by OGDCL from any company having the same large setup
with such huge finances.

Threats:

Being a Government owned organization; Government has maximum interference while

deciding its investment policies.
Global trends are rapidly changing which might affect its performance
Any decrease in future oil prices may prove to be a great threat for OGDCL
Globalization is the factor which brings the strong companies in Pakistan.
Competitors may have superior access to channels of distribution.

PESTAL Analysis:
PEST analysis ('Political, Economic, Social and Technological analysis''') describes a framework of
macro-environmental factors used in the environmental scanning component of strategic management.
PEST analysis of OGDCL is referred below:

Political Analysis:
Political factors are how and to what extant a government intervenes in the company.Oil is one of the
most required worldwide required commodities. As government has high influenced in the oil industry
and this industry have been regularly and closely monitored by economists.

Economic Analysis:
In the oil industry economic factors are represented by the: influences of the supply and demand on the
oil price; influences of the supply or demand of the complementary goods and influence of the supply
and demand of substitute resources. For the OGDCL exposure to foreign exchange rate risk is high.
Foreign trade regulation also might affect the entity operations.

Social Analysis:
Social factors are represented by demography, culture, religion structure, literacy and income
distribution to the different products. As people having higher income prefer petrol and diesel for their
vehicle but people having lower income prefer substitute of petrol for their vehicle.

Technological Analysis:
Technological factors are represented by technologies, techniques and methods that influence the
activities within an organization. In oil industry, the technologies are used exploration, transport (roads,
oil tanks, pipelines), in refineries, in reducing the time of production the losses from the production
process. Secondary technologies and techniques could be used in environment protection, worker's
protection, in improving the efficiency of the management by using of new software and hardware.
Technologies that influence the oil company from outside the oil industry can influence entire oil
industry (upstream and downstream). These technologies are represented by the complementary
products and substitutable products. The complementary products influence the demand for oil by
developing technologies that will reduce the consumption of oil products or replaced them with other a
substitutable product.

Economy Analysis
Pakistan's economy has continuously registered growing energy requirements over the years. The
country's energy mix mainly comprises oil, gas, coal and liquefied petroleum. Of these oil and gas
contribute 80% of the country's total energy supplies. The country currently meets 16% of the crude oil
demand from the indigenous sources and is highly dependent on import of oil and petroleum products.
The transport sector is the largest consumer of petroleum products in the country (49%), followed by
power generation (42%) and industrial (5%) sectors. Pakistan is among the one of the highest gas
dependent economies of the world. The share of gas in the overall energy mix has declined lately
emanating from the scarcity of the resource in the country. Pakistan's available gas reserves are 27.8
trillion. The country currently meets 16% of the crude oil demand from the indigenous sources and is
highly dependent on import of oil and petroleum products. The transport sector is the largest consumer
of pet

Shareholders

Percentage

Government of Pakistan

74.97

OGDCL Employees Empowerment Trust

10.05

Private Investors

14.98

Total
100.00
Petroleum products in the country, followed by power generation and industrial sectors.

Future Outlook
PIPELINE PROJECTS:

Iran-Pakistan (IP) Pipeline:

Estimated Cost of the 42 diameter US$ 1.245 billion will provide 750 MMCFD
Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline:

About 3.2 BCFD gas will flow through the 1,680 km pipeline
Estimated Cost of the 56 pipeline is about US$ 7.6 billion with production of 3.2 BCFD

COAL:
Total Proven Reserves

185 Billion Tons

Production

3.4 Million Tonnes

Consumption

7 Million Tonnes

Imports

3.6 Million Tonnes

Sector Analysis
The oil and gas sector of Pakistan is on the rise and working hard to fulfill the national demand. Oil and
gas are the two of the key components of the energy mix contributing around 80% share to the 64
million TOE of energy requirement in the country.
According to last Economic Survey 2013, Pakistan estimated that there are 27 million barrels of
reserves available that are recoverable for the use and Pakistans consumption is 19.21 million tones.
The average oil production was 66,032 barrels per day in 2013 and it was the growth of around 13%
over the last year. There are total 7 oil Refineries, 6772 petrol stations are operating in Pakistan and 258
oil & gas discoveries and 803 wells drilled till now.

Oil refineries

Pak-Arab Refinery Limited

Pakistan Refinery Limited

Attock Refinery
National Refinery

Indus Oil Refinery Ltd (not yet operational)

Khalifa Coastal Refinery (not yet operational)
Trans Asia Refinery (not yet operational)

Industry Analysis
Pakistan is facing a rapid increase in the demand for energy due to exponential growth in its population
and strong economic growth during the past decade. In order to diversify its energy options, the country
needs to redefine its energy mix with preference to cost effective energy sources, integrating their longterm potential in a way that they evolve technological developments and associated economic and
environmental benefits.
In an effort, the government is looking forward to initiate several projects in coming months to generate
electricity through thermal, hydel, nuclear, coal, wind, solar and other alternate energy resources.
Moreover, incentives and facilitation are being offered for enhancing E&P activities in the country.
Further to complement energy security and sustainable development, the country needs to pursue
regional ties with neighboring countries through joint ventures and trade agreements. In this regard, the
Government puts forth the promising policies that are facilitating trade and investment in the country
and helping foreign investors to identify items of mutual Interest and explore areas of economic
cooperation.

Oil & Gas are the two major components of the Energy Mix contributing almost 80% share to the 64.7
Million TOE of energy requirement in the country. To cater the increasing energy needs in all sectors,
Government is pursuing polices of attracting private investment. As a result, the Oil & Gas sector has
attracted Foreign Direct Investment of USD 412 Million in 2013-2014.
Moreover, Pakistan is ranked as having the 6th largest coal reserves in the world with 6% share in the
Energy Mix. Projects are being launched on Government & private level to use this cheap indigenous
energy resource for coal power generation in the upcoming years.
The liquidity ratios of Pakistan oil industry is not much efficient as it should need to be. Current ratios
give us the sense about the ability of a company to turn its product into cash. The current ratio of
industry is decreasing with the passage of time which means the ability of industry to pay its short term
liabilities is getting low as compare to past few years. Also the cash ratio of the industry is not much
stronger
as
the
industry
has
to
pay
high
debt
to
its
suppliers.
It means that ratio of cash and marketable securities against current liabilities is very low but cash ratio
is increasing with the passage of time and working hard to pay its liabilities. There are several reasons
behind lowness of these ratios. The main reason is the high amount debt taken by industry from its
suppliers and in order to pay those debts, industry does not have much cash in hand. As per profit of the
industry
concern,
it
is
increasing
with
the
passage
of
time.
Profit of oil industry has been increased in the ninth month or 3rd quarter of fiscal year 14 while it was
decreasing before. It is come to know that the earning of oil and gas explorers increase by 18% in third
quarter of FY14 while in the previous quarter ended in Dec 2013, the earning of the sector declined due
to the appreciation of Pak rupee against dollar. Major oil and gas exploration and production companies
working in Pakistan include Pakistan Oilfield (POL), Gas development Company and Pakistan
Petroleum.

KEY INDICATORS AT A GLANCE:

OIL:
Total Resource Potential

27 Billion Barrels

Refining Capacity

14 Million Tonnes

Crude Oil Production

85,000 Barrels/day

Oil Imports

6.3 Million Tons

Consumption

21 Million Tons

GAS:

Total Resource Potential

282 TCF

Recoverable Reserves

24 TCF

Production

4 BCFD

Industrial Consumers

10,717

Commercial Consumers

79,109

Domestic Consumers

7,034,126

Distribution Network

135,225 km

Transmission Network

11083 km

Company Analysis
OGDCLs growth strategy is based on structuring the balanced resource portfolio with eligible teams
appointed in proper exploration and acquiring of land. The Company has obtained 29 blocks of land
and now exploring through all four provinces.
Exchange Rate Risk: the currency risk against the payments for purchase of material and equipment
and hiring of third party services is neutralized by natural hedging provided by OGDCLs price
mechanism
Credit risk: Settlements of such debts has been delayed due to non-availability of funds creating intercorporate circular debt
In FY13, OGDC received two payments to settle its overdue receivables from oil refineries and gas
companies. The first one arrived in the form of term-finance certificates (TFCs) issued by Power
Holding Limited (PHPL) worth Rs82bn. OGDC received another relief through Rs56bn PIBs by the
end of June 2013. We believe this has improved the companys liquidity position as its receivables have
dropped from 251days to 90days during FY12-13. We believe this can result in higher cash payouts
going forward. This can be expected from OGDC since it paid as much as 92% of net earnings in
FY08, prior to the circular debt build-up. We expect OGDC to payout DPS of Rs15 and Rs18 for FY14
and FY15, respectively.
OGDCL internally evaluates its reserves on quarterly basis and also arranges reserve evaluation study
by independent international experts after every three years for verification/up-dation of the Companys
reserves.
OGDCL is constantly endeavoring to maintain production level by applying latest Improved/ Enhanced
Oil Recovery (I/ EOR) techniques in order to arrest natural decline from producing fields and to
enhance production by expediting connectivity of the new exploratory & development wells in the
system.
Having 45 Operated Oil & Gas fields, geographically distributed all across the country; OGDCL has 18
Oil & Gas processing plants. These include Dehydration, LPG, Sulphur Recovery, H2S Removal, Gas
Sweetening, Condensate Stabilization, Refining and Compression plants.

Various measures have been taken in order to augment production levels to reach new heights. This
includes setting up of aggressive targets, enduring commitment by its professionals, and induction of
latest technologies, pursuing industry best practices, strengthening surveillance techniques, enhancing
in-house engineering design & simulation capabilities, utilization of state-of-the art automation systems
and fostering use of information technology.

Share Price Sensitivity Analysis

Being involved in exploration for and development of hydrocarbons, OGDCLs business is speculative
in nature and various factors may produce a potential impact on the Companys share price. In this
regard, the key factors are as follows:

Changes in Commodity Prices (Crude Oil/HSFO)

Changes in the international Crude Oil/HSFO prices impact revenue thus influencing the Companys
share price.

Macroeconomic, Political and Security Environment

Changes in macroeconomic factors such as growth in economy, inflation, interest & exchange rates and
their outlook also affect the Companys share price. Political stability reduces the Countrys risk
premium and positively impacts the share price. Moreover, improvement in security situation provides
access to hydrocarbon areas along with reducing security related expenditures thus positively impacting
OGDCLs share price.

Regulatory and Licensing Regimes

Improvement and stability in the regulatory regime and better pricing policies positively affect future
earnings and may lead to a favorable impact on OGDCLs share price.

Success/Failure on Operational Fronts

OGDCLs share price positively responds to success achieved on exploration fronts, enhancement of
hydrocarbon production from existing & newly developed fields and timely completion of development
projects. Failures such as dry holes and delay in completion of the development projects may produce a
contrary effect on the Companys share price.

Infrastructure and Technology

Improvement in existing infrastructure and introduction of new technologies reduces exploration &
production costs and provides access to untapped hydrocarbons thus creating future growth
opportunities and positively impacting the Companys share price and vice versa.

Risk and Opportunity

By the very nature of E&P business, OGDCL is exposed to various risks inherent in its core business
activities including finding and developing of oil and gas resources. These activities are speculative in
nature and are characterized by inherent uncertainties, geological surprises and complexities which may
have a potential impact on the Companys financial conditions and results of operations.
OGDCL Management is well aware of these risks & uncertainties and ensures that the Company is
equipped with effective strategies and system to identify and mitigate the adverse impact of these risks.
In this regard, a Risk Management Committee has been established to apprise the Board of the risk
management policies and procedures pertaining to assessing, treating and monitoring spectrum of risks
which the Company faces along with ensuring quality decision making for achieving business goals and
objectives.
Risks and uncertainties which are believed to be material in nature coupled with their mitigating
techniques are outlined as follows:

Strategic Risk

OGDCLs business strategy aims at optimizing the portfolio and sustaining production growth in a cost
effective manner. In this pursuit, while going forward, the Company cannot guarantee maintenance of
its high drilling success and effective execution of low cost strategy with respect to finding and
developing of oil and gas prospects. To counter this risk of strategic failure, the Company focuses on
utilizing latest production techniques and advance technology to exploit new reserves and boost
production while ensuring its low cost operator status. In addition, the Company renews and repositions
its portfolio to embark upon future growth opportunities in line with the strategic objectives laid out in
its strategic plan to grow reserves and increase shareholders value.

Commercial Risk
In view of the rising hydrocarbon demands and prevailing energy crisis in the Country, OGDCLs oil
and gas production is readily absorbed in the indigenous market thus bearing no risk regarding sale of
hydrocarbon products. However, following factors may unfavorably influence the Companys financial
stature:

Commodity Price Risk

The crude oil prices in Pakistan are linked to a basket of Middle East crude oil prices and any volatility
in the prices of the crude oil has a significant impact on OGDCLs sales revenue and profit margins.
However, gas sales which is a major component of the Companys revenue is less prone to this risk as
the gas prices of major fields are capped at fixed crude oil/HSFO prices and sales can only be affected
in case the international crude oil prices fall below the capped price.

Foreign Currency Risk

OGDCLs functional and reporting currency is Pak Rupee. The Company is exposed to foreign
currency risk with respect to crude oil and gas prices pertaining to its Chanda field and nonoperated joint venture fields which are quoted in US dollars and translated into Pak rupees using
exchange rate established by the regulatory authority. Therefore, any decline in the value of Pak
Rupee against US dollar has a positive impact on the Companys earnings and vice versa. While
currency risk arising against payments denominated in foreign currencies for purchase of material
& equipment and hiring of third party services is neutralized by the natural hedging provided by the
Companys pricing mechanism.

Credit Risk
Significant trade debts are payable to OGDCL by crude oil refineries and natural gas distribution
companies against supply of crude oil and natural gas products respectively. Settlement of such
debts has been slow due to non-availability of funds resulting in Inter Corporate Circular Debt issue
in the energy industry. As a partial settlement of the circular debt, during fiscal year 2012-13, GOP
arranged issuance of TFCs and PIBs led OGDCL to settle significant amount of trade debts
outstanding against oil refineries and gas distribution companies. While inter corporate debt has
started piling up again, the Companys management is carrying out all possible measures including
vigorous follow-ups and constant liaison with GOP to recover overdue receivables and avert
liquidity problems.

Financial Risk
OGDCL is currently not exposed to financial risk as evident by the Companys strong operating cash
flows and a debt free balance sheet. However, delay in settlement of trade debts can put the Companys
cash position and financial standing at risk. This may trigger the need for borrowing in order to carry
out planned exploration and development activities/projects alongside ensuring timely discharge of
statutory obligations including royalty, taxes/duties, dividend etc.

Reserves Risk
Crude oil and gas reserves data is only estimate and the actual quantity of recoverable reserves may
differ from the estimated proven and probable reserves. This is due to inherent uncertainties in the

application of reserves evaluation techniques. In order to cope up with this risk, the Company internally
evaluates its reserves on quarterly basis along with arranging reserve evaluation study which is carried
out by independent international experts after every three (3) years for verification/up-dation of the
Companys reserves status. In this connection, Bayphase Limited, UK is currently engaged in carrying
out reserve evaluation study-2014 for all OGDCL operated and non-operated fields.

Environmental Risk
Environmental risk comprises natural disasters or operational catastrophes in shape of earthquakes,
cyclones, floods, blowouts, fires, explosions and other such events which cause the Company
operations to disrupt or be curtailed. In this connection, all insurable risks identified with operations
are covered through insurance besides maintaining a contingency fund to cover uninsured damages.

Security Risk
Security risk in shape of insurgency and political instability adversely influence the Companys
operations causing threat to the lives of the workers in affected operational areas, suspension of
business activities, production limitations etc. The Company is exposed to such risks particularly in
the provinces of KPK and Balochistan. To manage this risk, OGDCL relies on its well thought-out
plan for curbing or neutralizing potential security threat and collaborates with law enforcement
agencies to deploy security personnel in the sensitive areas for protection of its workers and
operational facilities.

Competitive Risk
The GOP has taken steps to liberalize E&P sector in Pakistan, particularly with respect to award of
exploration concessions which is done on a competitive basis. OGDCL, being a public sector entity,
does not enjoy any preferential treatment or relaxation of any sort in bidding for new exploration areas.
Moving on, the Company may face increased competition with regard to acquisition of new exploration
areas and utilization of advance equipment and technology by the competitors to more efficiently
explore and develop oil and gas fields. In order to cope up with this risk, the Company based on its
quality asset base, capable workforce and commitment to continuously apply technical solutions and
innovative technology will continue to undertake challenging tasks to support long term growth and
strengthen business competitive position
Future Outlook
Keeping in view prevailing energy crisis in the Country, OGDCL, being a state owned enterprise and
market leader in E&P sector of Pakistan is cognizant of its responsibility to play its part in meeting the
growing energy demands of oil and gas in the Country. In this pursuit, the Company on the exploration
front aims to create value by maintaining a mixed portfolio of onshore exploration concessions in the
established, promising and unexplored areas while keeping a balance between accelerating exploration
activities and risk mitigation with acceptable drilling success ratio and focus on reserve addition. As
part of the Companys work program relating to twenty nine (29) new exploratory blocks, an extensive
work program has been designed to tap additional reserves and further enrich the portfolio.
On the production front, the Company is endeavoring to explore new possibilities in addition to
improving the existing hydrocarbon production by employing latest production techniques
accompanied with expediting connectivity of new exploratory and development wells in the system. As
a result of pursuing an aggressive production enhancement strategy, the Company during the year
witnessed increased crude oil and gas production in comparison with the preceding year. Additionally,
with a quality pipeline of ongoing development projects, significant surge in the production volumes is
expected upon completion of these projects supporting the Companys growing trend of production in
the years to come.
In addition to the above, OGDCL will continue to focus on formulation of joint ventures with leading
E&P companies both within the Country and abroad to introduce new partners with complementary
skills for ensuring that ventures and projects are value driven. The Company also plans to increase
capital expenditures governed by strong financial discipline in the coming years to seek production

growth and improve future returns. Looking forward, OGDCL based on its aggressive exploration
strategy coupled with near term completion of development projects and a strong financial position is
well positioned to deliver upstream growth and improved profit margins. With operational and
technical expertise in hand, the Company will continue to undertake new development activities and
accept new challenges for adding reserves and optimizing production while keeping with the long held
strategy of creating and maximizing value for shareholders.

OGDCL - Valuation
We have forecasted FCF of OGDCL for the next five years on a consolidated basis taking the average
percentage of the previous five years Capex. Moving forward the cash flows would be a function of
endorsement.
Using DCF methodology we have arrived at a target price for OGDCL at PKR. 333.06 based on
current outstanding shares of Rs. 4,300,928. In determining this value we have used the following
metrics.

OGDCL Model Assumptions and Methodology

Cost of Equity:
We value OGDCL at PKR 333.06 based on Capital Asset Pricing Model. Our key assumptions are : 1)
long term terminal growth rate at 5%, because after five years it get difficult to predict the performance
of any company as it get invisible for proper valuation thats why we have taken the average GDP
growth rate since 1965. 2) Risk free rate of 10-year PIBs as 11%. 3) Market risk premium as 6.50%. 4)
Beta of the market at 0.84 based on OGDCL five years trading history. At current price level, the scrip
provides upside of 41% to our Nov-14 target price of PKR. 333.06. Because the stock is trading at PKR
236.94 as on 13th Nov 2014.

Capital Asset Pricing Model

Risk Free Rate (PIB 10 yrs)

11.00%

Risk Premium
Beta

6.50%
0.84

Required Rate of Return

16.46%

Using Two-stage FCF models

Assumptions
Sales Growth - CARG
Gross Margin
Operating Margin
Other Income as a % of Sales-net
Finance Cost % of Long Term Debt
Tax rate

12.6%
69%
60%
4%
-10.6%
31%

FCFE Valuation
PV FCFE
Terminal Value :(FCFE/r-g)
PV Terminal Value

542,412,287
1,906,754,651
890,042,788

Equity Value

1,432,455,076

No of Shares Outstanding

4,300,928

Target Price

333.06

Terminal Value
FCFE+1
g (Average GDP growth rate since 1965)
Re

218,514,083
5.0%
16.46%

PKR 3236.94; Target 333.06; Upside Potential 41%

Current Price As of (13-Nov-2014)

236.94

Target Price

333.06

Upside Potential

41%

P/E RATIO :
OGDCL
APL
PPL
Average P/E
Premium / Discount over Industry average
Assume P/E forward 12 months earnings

2014
10.78
11.31
8.29
10.13
6%

2013
7.12
9.93
6.05
7.70
-8%

2012
10.36
7.96
7.87
8.73
19%

2011
10.32
6.08
7.86
8.09
28%

2010 Average
6.09
8.93
4.63
7.98
5.68
7.15
5.47
8.02
11%
11%
11.28

2015 EPS

29.28

Target Price

330.3

RELATIVE VALUATION:
The price/earnings approach is the familiar valuation measure today other than the DCF model. Using the
Leading P/E also called forward P/E is calculated by dividing the current price by next year expected earnings.
Done for the verification of the comparing target price valuation using the DCF model and the relative valuation
which shows there is only the gap of Rs. 3, which means our DCF model is somehow sound proofed.

RECOMMENDATIONS:
We propose a 'Buy' recommendation on OGDCL with a PO of PKR 333.06. Based on
our valuations currently the stock is trading on 236.94 which show there is a 41% price
appreciation from its current level as of 13th Nov 2014

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