VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Oil & Gas Development Company Limited (OGDCL) at ‘AAA/A-1+’ (Triple A/A-One Plus). The medium to long-term rating of ‘AAA’ denotes highest credit quality, with negligible risk factors, being only slightly more than for risk-free debt of Government of Pakistan. The short-term rating of ‘A-1+’ denotes highest certainty of timely payment, liquidity factors are outstanding and safety is just below risk free short-term obligations of Government of Pakistan. Outlook on the assigned ratings is ‘Stable’.
The assigned ratings of OGDCL incorporate its ownership structure with majority shares held by the Government of Pakistan. The low business risk of the Company emanates from its robust margins, providing considerable cushion against volatility in international oil prices.
Moreover, OGDCL is the leading Company in exploration and production sector of Pakistan. The Company has an assured product off-take amid excess demand of oil & gas vis-à-vis local supply.
During FY19, OGDCL registered healthy growth in revenue and profits, driven largely by higher LPG production, considerable increase in the average realized price of hydrocarbons and rupee depreciation. The ratings also take into account low financial risk profile, emanating from debt-free capital structure and strong liquidity indicators. Despite rising trend in industry-wide inter-corporate debt, the Company continues to manage its capital expenditure requirements through internal cash flows.