Press Release

VIS Reaffirms Entity Ratings of Oil & Gas Development Company Limited

Karachi, December 4, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Oil & Gas Development Company Limited (“OGDCL” or “the Company”) at ‘AAA/A1+’ (Triple A/A One Plus). Medium to long term rating of 'AAA' indicates highest credit quality; the risk factors are negligible, being only slightly more than for risk-free Government of Pakistan’s debt. Short-term rating of 'A1+' suggests strongest likelihood of timely repayment of short-term obligations with outstanding liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous ratings action was announced on December 20, 2023.

OGDCL is Pakistan's largest national oil and gas company. The Company is the Country's leader in terms of exploration acreage, oil and gas reserves, and production contribution. It was founded as a Public Sector Corporation in 1961 and later converted to a Public Limited Company in October 1997. In October 2003, the Company was listed on the Pakistan Stock Exchange, and its Global Depository Shares began trading on the London Stock Exchange in December 2006. The primary business of OGDCL is the exploration, development, and production of oil and gas resources, and related activities. Crude Oil, Gas, Liquefied Petroleum Gas (LPG), and Sulphur are products in the portfolio. OGDCL supplies crude oil and condensates to refineries for processing, while gas is supplied to gas distribution companies, power generation companies, and the fertilizer industry.

Assigned ratings take into account the business risk profile of Pakistan’s oil and gas exploration sector, assessed as medium to low. This reflects a balance between resource potential and operational challenges. The sector benefits from steady domestic demand and strategic importance while facing risks related to resource depletion, circular debt exposure, and the complexities of developing unconventional resources. OGDCL’s business risk profile is supported by its position as the leading upstream oil and gas producer, reinforced by a robust reserves base and exploration-led growth initiatives, alongside diversification into unconventional resources, international projects and mining activity.

Assigned ratings also incorporate the financial risk profile of Oil and Gas Development Company Limited (OGDCL), characterized by a debt-free capital structure, strong liquidity, and consistent cash flow generation. During FY 2024, the Company registered improved Sales primarily on the back of favorable exchange rate variance. Profitability was slightly impacted by elevated costs and lower finance income, while increase in associate’s contribution and one-off tax adjustments on account of reversal of provision for depletion allowance pertaining to prior periods supported bottom-line performance. The Company’s ability to fund significant capital expenditures internally and maintain a healthy liquidity position mitigates risks associated with circular debt. Trade receivables remain high, although improved collection rates and government initiatives to address circular debt support liquidity stability. Sufficient reserves underpin the Company’s operational sustainability, with exploration-led growth and diversification strategies reinforcing its resource base.

Going forward, the assigned ratings will remain sensitive to OGDCL’s ability to address challenges related to circular debt, sustain profitability margins, and maintain strong liquidity metrics. Management’s commitment to exploration-led growth and diversification, alongside efforts to enhance operational efficiencies and recover receivables, will be important in supporting the ratings. Moreover, continued adherence to environmental and governance standards will further influence the Company’s ratings.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.



Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Government Supported Entities
https://docs.vis.com.pk/docs/Meth-GSEs202007.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .