Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Oil & Gas Development Company Limited (OGDCL) at 'AAA/A1+' with a stable outlook. These ratings reflect OGDCL's robust financial health, industry leadership, and commitment to operational efficiency, as well as its strategic importance in Pakistan’s oil and gas sector.
According to VIS Credit Rating Company Limited, the reaffirmed ratings indicate the highest credit quality for OGDCL, with negligible risk factors comparable to risk-free government debt. The 'AAA' rating for medium to long-term obligations and the 'A1+' rating for short-term liabilities underscore the company's outstanding capacity to meet financial commitments, supported by strong liquidity and consistent cash flow generation.
OGDCL, Pakistan's largest national oil and gas entity, has a significant impact on the country's energy sector with its extensive exploration acreage and substantial reserves. The company, established as a public sector corporation in 1961 and later transformed into a public limited company, has been publicly traded on the Pakistan Stock Exchange since 2003 and on the London Stock Exchange since 2006. Its operations span the exploration, development, and production of oil and gas resources, with a diverse product portfolio including crude oil, gas, liquefied petroleum gas, and sulphur.
The ratings reflect the medium to low business risk profile of Pakistan's oil and gas exploration sector, characterized by steady domestic demand and strategic significance, counterbalanced by challenges such as resource depletion and circular debt exposure. OGDCL's leading market position, substantial reserves base, and strategic growth initiatives in unconventional resources and international projects bolster its business risk profile.
Financially, OGDCL benefits from a debt-free capital structure and strong liquidity, with improved sales in FY 2024 driven by favorable exchange rate variances. While profitability faced pressures from increased costs and lower finance income, contributions from associates and tax adjustments supported overall performance. The company's ability to internally fund capital expenditures and maintain a robust liquidity position mitigates risks associated with circular debt.
Looking ahead, OGDCL's ratings will depend on its ability to manage circular debt challenges, sustain profitability, and maintain strong liquidity. The company's focus on exploration-led growth, diversification, and operational efficiency, alongside adherence to environmental and governance standards, will be crucial in maintaining its credit standing.