Press Release

JCR-VIS Reaffirms Entity Ratings of Oil and Gas Development Company Limited at AAA/A-1+

Karachi, April 30, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Oil and Gas Development Company Limited (OGDCL) at ‘AAA’ (Triple A) and short-term entity rating at ‘A-1+’ (A One Plus). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on June 9, 2014.

Ratings of Oil and Gas Development Company Limited (OGDCL) reflect systemic importance of the company to the national economy as the largest upstream Oil and Gas Company in Pakistan, majority owned by the Government of Pakistan. Ratings also incorporate low financial risk profile of the company as evident from healthy capitalization levels and strong liquidity profile. At end-FY14, OGDCL owned 31% of the total awarded exploration acreage in Pakistan and possesses the largest share of recoverable hydrocarbons in Pakistan at 57% of oil and 42% of natural gas reserves. Market share of the company in terms oil and gas production for FY14 stood at 50% and 29%, respectively.

During FY13, the company acquired 29 new exploratory blocks through competitive bidding which were formally awarded to the company during FY14. OGDCL is pursuing an aggressive exploration and production strategy and undertaking multiple development projects, which are at varying stages of completion. Upon completion of ongoing development projects, daily gross production of the company will be further enhanced.

During FY14, the company recorded the highest ever profitability in its history on the back of enhanced production, higher average realized prices, improved investment income & favorable exchange rate during the year. While profitability in full year FY15 is expected to be lower than FY14 on account of decline in the prices of crude oil, overall profitability of the company is expected to remain sizeable on account of revenues from sale of gas which contributes over half of total revenues. Management is pursuing a production enhancement strategy in order to partially mitigate the impact of decline in oil prices on profitability. In this regard, timely implementation of future development projects is considered important.

In the backdrop of decline in oil prices, build up in trade debts has been much slower lately. The management is actively pursuing for the recovery of trade debts and is currently in the process of negotiating a Gas supply arrangement with Sui Southern Gas Company Limited. Subsequently, the management expects improvement in recovery of trade debts.

Board of Directors of the company is chaired by Mr. Zahid Muzaffar while Mr. Zahid Mir has recently assumed charge as the Managing Director & CEO. The company’s Board composition conforms to international best practices with a sizeable number of board members comprising independent directors. Greater stability at the board level as well as in the senior management team is considered important for continuity of business strategy.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35743411-13.



Javed Callea
Advisor

Applicable Rating Criteria: Oil & Gas Industry (February 2004)
http://www.jcrvis.com.pk/images/oilngas.pdf

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