Oil & Gas Development Company Limited (OGDC), Pakistan’s largest E&P player by reserves, is entering a sustained recovery phase. Analysts highlight multiple growth drivers including major discoveries, improved cash flows, and long-term upside from Reko Diq.
Baragzai Discovery Fuels Production Ramp-Up
The Baragzai field, operated by OGDC with 56% working interest, represents the largest oil discovery in Pakistan since 2009. Phase-I is already contributing around 6,000 barrels per day (BPD) of oil and has added 38 million barrels of oil equivalent (MMBOE) to reserves.
Development of remaining formations under Phase-II is expected to lift output to 25,000 BPD while pushing total reserves potential to 100 MMBOE. This could add up to PKR 32 per share to OGDC’s fair value at full potential.
Cash Flows Strengthen Amid Gas Sector Reforms
IMF-backed reforms have improved collection rates to nearly 100% on gas sales since FY24, with negligible new trade debt buildup. This supports higher exploration spending and dividend payouts.
Legacy circular debt remains a challenge, but ongoing tariff rationalization and subsidy reforms are enhancing liquidity and payout capacity.
OGDC maintains the longest reserve life in the sector at around 19 years. Aggressive exploration has driven the highest discovery count in a decade during FY25.
Production growth is set to resume after years of decline, backed by new fields offsetting natural depletion in mature assets. A balanced oil and gas revenue mix provides stability.
Analysts at Optimus Capital Management reiterate an Outperform rating with a fair value of PKR 406 per share. This implies about 22% upside from the last day’s closing price of around PKR 334.
The valuation incorporates present value of free cash flows, cash holdings, 2P reserves, and long-term investments. Overdue trade debts are conservatively realized at 45%.
Reko Diq Offers Significant Diversification Upside
Rising gold and copper prices have enhanced Reko Diq economics. OGDC’s indirect stake through PMPL could contribute materially to long-term value despite project delays.
Offshore block participation further expands the exploration frontier for future growth.