Press Release
VIS Reaffirms Ratings of Oil & Gas Development Company Limited
Karachi, January 25, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Oil & Gas Development Company Limited (OGDCL) at ‘AAA/A-1+’ (Triple A/A-One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality, with negligible risk factors, being only slightly more than for risk-free debt of Government of Pakistan. The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk free short-term obligations of Government of Pakistan. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on January 20, 2020.
The assigned ratings to Oil & Gas Development Company Limited (OGDCL) incorporate sound sponsor profile as majority shares of the company are held by the Government of Pakistan. The ratings also reflect importance of the company to the national economy as the largest upstream Oil and Gas Company in Pakistan. The company’s share in local crude oil and gas was 47% (FY20: 46%; FY19: 45%) and 29% (FY20: 29%; FY19: 29%) respectively in 1QFY21. The low business risk of the company emanates from its robust margins, providing considerable cushion against volatility in international oil prices. OGDCL has an assured product off-take amid excess demand of oil & gas vis-à-vis local supply.
During FY20, the company reported lower profitability on account of decrease in international oil prices, lower demand on account of COVID-19 pandemic coupled with higher exploration and prospecting expenditure and operating expenses; however, overall profitability levels still remains healthy. Currently, oil demand and prices are rebounding and are expected to continue in this trajectory as a result of recovery in global economies primarily due to roll out of COVID vaccines. The ratings also take into account low financial risk profile of the company as evident from its debt-free capital structure and strong liquidity profile. The Company continues to manage its capital expenditure requirements through internal cash flows.
For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.
Faryal Ahmad Faheem
Deputy CEO
Applicable Rating Criteria: Industrial Corporates (May 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf