Press Release

JCR-VIS Reaffirms Entity Ratings of Oil and Gas Development Company Limited at AAA/A-1+

Karachi, March 18, 2011: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Oil and Gas Development Company Limited (OGDCL) at ‘AAA/A-1+’ (Triple A / A One Plus). Outlook on the medium to long-term rating is ‘Stable’.

The ratings incorporate the company’s strong sponsorship, with majority holding of the Government of Pakistan. OGDCL is the largest oil and gas exploration and production (E&P) company in the country. The strategic nature of the company’s business activities in an energy deficient country, ensures strong demand of oil & gas products.

OGDCL has a robust earnings profile emanating from the country’s largest oil & gas reserves. In recent years, the company has experienced a slight decrease in production levels due to natural decline in reserves and fewer major discoveries. The recent floods in the country also impacted production from some fields. Nevertheless, the company posted healthy gross margins primarily on the back of higher average price realized in FY10. Expectations regarding relatively higher global oil prices during 2H11 will positively bear on the company’s revenues.

The healthy financial profile of the company is an outcome of its strong cash generation ability. However, ongoing accumulation of trade debt during FY10 and 1H11, which largely pertained to the pending issue of inter-corporate debt, is a concern for the liquidity profile. The company has been managing liquidity constraints from internal sources primarily by reducing the cash dividend payout, any further accretion in trade debts can trigger the need for external borrowings. The company has arranged credit lines from commercial banks in case such need arises.

In order to enhance the pressure of gas from Qadirpur field, OGDCL is about to complete phase-1 of the project. The company has installed/commissioned 14 compressors on site and performance testing is expected to start in March / April 2011. Moreover, there are other projects of large and small magnitude which are expected to arrest the declining trend in the oil and gas production. The company has also started work at Zin block which is considered to have high potential for gas reserves. The major impact of the aforesaid projects is expected to start reflecting in booked reserves from 2012 onwards.

For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 510) at 021-35311861-70; fax to 021-35311872-73 or Mr. Maimoon Rasheed at 042-36610681-4.

Javed Callea

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2011 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited