In 1QFY24, OGDC
In the recently released 1QFY24 financial performance, the Oil and Gas Development Company Limited (PSX: OGDC) saw an 8% year-over-year decline in profitability.
Business Recorder 
Despite growth in the top line, the oil and gas exploration business saw a dip in its bottom line, mostly as a result of inflationary pressures. Higher gas prices and good exchange rates contributed to OGDC's 13% annual income growth. These were somewhat compensated by lower hydrocarbon production and lower oil prices for the quarter. The average realized price of gas increased by 26%, and the average recorded exchange rate was Rs291.58 per USD in 1QFY24 compared to Rs224.57 per USD in 1QFY23. During the quarter, the net realized prices for crude oil decreased by 17% on an annual basis. Additionally, throughout the quarter, oil and gas production decreased by about two and one percent, respectively, compared to the previous year.
While gross profits increased by 3.7 percent as a consequence of OGDC's topline growth in 1QFY24, gross margins declined from 71 percent in 1QFY23 to 65 percent in 1QFY24 as a result of an increase in operating expenses that was more than commensurate. Raising rent, fees, and taxes associated with lease renewals, in addition to salary, wages, and benefits, as well as amortization of development and production assets, were the main causes of the increase in operating expenses.
During the quarter, the corporation also saw a 70% increase in expenditures related to prospecting and exploration. The company's earnings during the first quarter of FY24 were impacted by higher E&P expenses as well as a drop in finance and other income because of weaker exchange gains throughout the period.
Because of the fields' natural decline, the E&P sector has been experiencing declining quantities. Furthermore, the output quantities during FY23 were significantly impacted by the heavy rains and flooding. With the latest rise announced, increased gas prices helped OGDC's top line and would help the company's finances in the upcoming quarters as well. For FY24, the company has allocated around $80-100 million for capital expenditures, mostly driven by ongoing initiatives. Additionally, it is now getting ready for contracts and rigs for its offshore Block-5 (Adnoc), where drilling is anticipated to start by the start of FY26.
