Privatisation committee reconsiders govt divestment from OGDCL, PPL

ISLAMABAD: The Cabinet Committee on Privatization (CCOP) is facing a challenge on Wednesday to decide on a long-pending divestment from PPL and OGDCL, as investor appetite has been redirected to attractive valuation amid downbeat exploration and production sector.

The CCOP is considering divestment of Pakistan Petroleum Limited (PPL) and Oil and Gas Development Company Limited (OGDCL) during the meeting, according to an official document.

Although the divestment decision had been rectified by CCOP and the federal cabinet last year, it was not implemented as the market fundamentals, like low valuation and shift in investor appetite, analysts told The News.

“It is yet to be seen if still the government goes with divestment,” said a senior analyst on condition of anonymity.

In August 2019, the cabinet committee on privatization approved inclusion of 10 public sector enterprises into the list of proposed divestments. It was decided that the government would divest up to 7 percent shareholding from OGDCL and 10 percent from PPL.

However, the offering was put on hold as their stocks were trading at the unattractive levels and the government couldn’t obtain gains it had had when shares were divested in 2014.

Currently, PPL is trading at a monthly average of Rs82.62, according to Investing.com, compared to Rs219 per share at the time 5 percent offload by the government in June 2014. Likewise, OGDCL is trading at a monthly average of Rs88.85/share as against Rs216 when its shares were divested. “Finding strategic investors will be a challenge,” said the analyst. Analysts said investors are focusing on high value stocks in tech sector.

The participation in divestment decision by the government would only be beneficial to investors if share values of entities are attractive because with such small stake they still couldn’t have say in policy decisions, said an analyst. OGDCL boasted of strong key performance indicators over the years.

Exploratory/appraisal wells and development wells spud during the last fiscal year of 2019/20 were 25 against the same numbers in 2014/15 representing continued drilling activities to replenish and augment reserves base, OGDCL said in an annual report.

Oil and gas/condensate discoveries made during the last six fiscal years were 27 leading to strengthening of company’s oil and gas reserves base, it said. Quantity sold of liquified petroleum gas (LPG) was higher compared to 2014/15. Crude oil and gas quantity sold has been impacted due to outbreak of COVID-19 and natural decline. OGDCL’s net sales rose to Rs244.8 billion from Rs210.6 billion in 2014/15 due to higher LPG production, exchange rate and realized price for gas.

PPL’s sales revenue declined by Rs6.29 billion during the last fiscal year. The average size of the discoveries in the known oil and gas corridors/basins has substantially decreased from 400 billion cubic feet in 2000 to 30 billion cubic feet currently. “Therefore, in order to sustain the company’s production and attain growth, the company will have to move away from this corridor into the frontier and offshore areas for further exploration,” PPL said.