Karachi: Oil and Gas Development Company Ltd (OGDC) reported its financial performance for the first quarter of fiscal year 2026, revealing earnings of PkR38.3 billion, which represents a 7% decline compared to the same period last year. This decrease aligns with expectations and is primarily attributed to a reduction in other income. Despite the drop in earnings, the company declared its highest-ever interim cash dividend for a first quarter at PkR3.5 per share, with a payout ratio of 40%.

Net sales for the quarter amounted to PkR96.2 billion, reflecting a 9% year-over-year decrease. This decline was driven by reduced hydrocarbon production and lower average oil prices, with the Arab Light crude averaging US$71.5 per barrel during the quarter, an 11% drop from the previous year.

In terms of production, OGDC's oil and gas output fell by 2% and 9% respectively, compared to the same period last year, reaching 31,200 barrels per day of oil and 635 million cubic feet per day of gas. However, production showed a recovery of 10% and 9% on a quarter-over-quarter basis due to improvements in key fields.

Operating expenses increased by 8% year-over-year, totaling PkR29.3 billion for the quarter. Exploration expenses decreased by 20%, amounting to PkR3.0 billion, as the company focused on drilling activities at several sites and conducting seismic surveys.

Finance income was significantly lower at PkR12.2 billion, a 53% decline from the previous year, due to reduced provisioning recoveries related to accrued interest and exchange losses on foreign deposits. The company's cash and short-term investment balances were reported at PkR222 billion as of the end of the quarter.

OGDC's trade receivables continued to decrease, closing at PkR613 billion, with gas revenue collection for the previous fiscal year estimated at 100%, marking an improvement from the prior year.

The effective tax rate for the quarter stood at 38%, compared to 51% and 28% in the corresponding period last year and the previous quarter, respectively.

AKD Securities Limited reiterated its 'Buy' recommendation for OGDC, citing a target price of PkR371 per share by December 2025 and a dividend yield of 7.6% for fiscal year 2026. The positive outlook is supported by strong production, future exploration prospects, a stake in the Reko Diq Mining Project, offshore interests in Abu Dhabi, improved cash payouts, and potential joint ventures with U.S. firms for shale exploration.