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JCR-VIS reaffirms entity ratings of Oil and Gas Development Company Limited at AAA/A-1+ - Press Release issued by JCR-VIS Credit Rating Company...

June 10, 2014



JCR-VIS reaffirms entity ratings of Oil and Gas Development Company Limited at AAA/A-1+ - Press Release issued by JCR-VIS Credit Rating Company Limited

Following is the text of press release issued by JCR-VIS Credit Rating Company Limited

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JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Oil and Gas Development Company Limited (OGDCL) at 'AAA' (Triple A) and short-term entity rating at 'A-1+' (A One Plus). Outlook on the assigned rating is 'Stable'.

The assigned ratings take into account low business risk profile of the company emanating from strong market dynamics related to oil and gas exploration sector, in general, and strategic importance of OGDCL in the local context, in particular.

While pursuing growth opportunities translating into enhanced production capacity through continuing exploration activities, the company has maintained low business risk profile. Maintenance of debt free capital structure by the company translates into low financial risk profile.

Shareholding structure of the company, whereby around three-fourth shares are held by the Government of Pakistan, is also a key rating factor. During FY13, the company witnessed considerable reduction in outstanding trade debts on account of government's initiatives to partially resolve inter-corporate debt along with intensified follow-up by the company's management leading to increased collection of receivables.

Trade debts were settled against government backed Privately Placed Term Finance Certificates and Pakistan Investment Bonds. While the inter-corporate debt, mainly against a gas utility company, has started to pileup again, though at a slower rate, the management is hopeful of more frequent periodic payments against receivables, going forward.

Despite severe liquidity issues in the energy sector in recent years, the company has been able to manage business activities without utilizing bank borrowings. With improving cash flow situation, the management has envisaged higher exploration related capital expenditure in the on-going year. The company has been recently awarded new blocks through participation in competitive bidding process; this has enhanced the acreage under exploration by more than two times.

For more information, contact:

Ms. Sobia Maqbool

CFA

JCR-VIS Credit Rating Company Limited

Tel: at 021-35311861-70

Fax: +9221 35311872-3

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Source: Pakistan Press International


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