PACRA assigns entity ratings to OGDCL
ISLAMABAD: Pakistan Credit Rating Agency (PACRA) has assigned a long-term entity rating of ' AAA' (Triple AAA) and short-term rating of ' A1+' (A One Plus) to Oil and Gas Development Company Limited (OGDCL).
The ratings reflect OGDCL's strategic importance to the Government of Pakistan (GoP) for being the largest upstream Oil and Gas company in Pakistan having predominant share of recoverable hydrocarbons reserves and exploration acreage. The ratings are dependent on sustained competitive positioning of the company, while upholding good governance practices. Continued dip in international oil prices influencing business margins and prevailing inter-corporate circular debt issue in the oil and gas industry of Pakistan remain key business concerns. The Company is the leading contributor in the Country's major hydrocarbon mix production and its oil and gas production continues to render foreign exchange savings.
The company's joint venture operations give further business penetration. The ratings incorporate robust financial profile of the company as reflected from debt-free balance sheet, strong liquidity, and access to capital markets for raising capital in case of need. Being part of oil chain, the company is exposed to circular debt issue. Gas distribution companies - SSGCL & SNGPL - are main contributors towards trade debt. OGDCL's business risk is low. In cognizance of declining oil prices, the company's absolute profitability has dropped; however, it remained sizable when compared to the planned financial requirements.
OGDCL is pursuing an aggressive exploration and production strategy with the aim to make successful discoveries to enhance oil and gas reserves and production volumes which would support the business bottom-line, said official sources. Over the years, significant reserves have been built up along with regular investment income stream. The ratings also incorporate predominant sovereign ownership structure - owned by GoP (75%) The company is engaged in exploration, development, production and sale of oil and gas in Pakistan. OGDCL covers 32% of Pakistan's total exploration acreage awarded as of June 30, 2015. Hydrocarbon reserves of OGDCL are 61% of oil and 33% of natural gas reserves of the country as at December 31, 2014. In FY15, the company contributed around 45% and 29% of Pakistan's total oil and natural gas production, respectively. OGDCL is majority (75%) owned by GoP. The company is listed on Pakistan Stock Exchange and London Stock Exchange.