GAS DISCOVERY AT SAHITO-1 EXPLORATORY WELL

Oil and Gas Development Company Limited (OGDCL) has announced a significant gas discovery at the Sahito-1 exploratory well, located in the Khewari Exploration License in District Khairpur, Sindh Province, Pakistan. This well, which was spudded on December 24, 2025, has tested at a remarkable rate of 17.2 million standard cubic feet of gas per day through a 32/64" choke, with a wellhead flowing pressure of 3,390 psi. The gas was sourced from the Lower Goru Formation, a promising geological layer that has previously yielded substantial hydrocarbons. This discovery is expected to play a crucial role in alleviating Pakistan's energy deficit while enhancing OGDCL's hydrocarbon reserves, thereby contributing positively to the country's energy landscape.

The Sahito-1 discovery comes at a pivotal time for Pakistan, which has been grappling with an energy crisis exacerbated by rising demand and insufficient domestic production. OGDCL, as the operator with a 95% stake in the project, alongside Government Holdings (Private) Limited (GHPL) with a 5% carried interest, is strategically positioned to capitalize on this find. The well was drilled to a total depth of 3,870 meters into the Sembar Formation, indicating the company's commitment to utilizing its in-house expertise for exploratory efforts. This milestone not only enhances OGDCL's operational profile but also aligns with the national agenda to boost indigenous energy production.

From a financial perspective, OGDCL's recent operational success may bolster its market position, although the company’s current market capitalization stands at GBP 15.52 billion. The financial health of OGDCL is critical to sustaining its exploration and development activities. While the announcement does not specify the current cash balance or debt levels, the successful discovery at Sahito-1 could potentially enhance cash flows, assuming the gas can be brought to market efficiently. However, investors should remain cautious about potential dilution risks, particularly if OGDCL seeks to raise capital for further development or operational expansion following this discovery.

In terms of valuation, OGDCL's market cap places it in a competitive tier within the oil and gas sector. To assess its relative valuation, it is essential to compare OGDCL with direct peers in the same market cap tier and commodity sector. Potential peers include Pakistan Oilfields Limited (PSX:POL), which operates in a similar capacity and has a market cap that aligns closely with OGDCL’s, and Mari Petroleum Company Limited (PSX:MARI), which also engages in oil and gas exploration and production. Another comparable entity is Crescent Petroleum Company Limited (AIM:CPG), which, while slightly smaller, operates in the same industry and offers a relevant benchmark for valuation analysis. These comparisons can provide insight into OGDCL's operational efficiency and market positioning.

For instance, Pakistan Oilfields Limited (PSX:POL) has been trading at an EV/EBITDA multiple of approximately 8.5x, while Mari Petroleum Company Limited (PSX:MARI) is closer to 7.0x. If OGDCL can leverage the Sahito-1 discovery to enhance its production profile and operational efficiency, it may command a similar or improved valuation multiple, particularly if the gas can be monetized effectively. Furthermore, the expected contribution of Sahito-1 to the national energy supply could bolster OGDCL's standing with stakeholders and regulators, potentially leading to favorable terms in future projects.

Execution risk remains a critical factor following this announcement. OGDCL has historically demonstrated a capacity to meet operational milestones; however, the successful development of the Sahito-1 well into a productive asset will depend on several factors, including regulatory approvals, infrastructure availability, and market conditions for natural gas. The company must navigate these challenges effectively to realize the full potential of its discovery. Additionally, the geopolitical landscape in Pakistan presents inherent risks that could impact operational timelines and costs.

Looking ahead, the next measurable catalyst for OGDCL will likely be the commencement of production from the Sahito-1 well, with timelines dependent on the completion of necessary infrastructure and regulatory processes. If the company can expedite these developments, it may see a positive impact on its share price and overall market perception. The announcement of production timelines or further exploration successes would serve as additional catalysts for investor interest.

In conclusion, the gas discovery at the Sahito-1 exploratory well represents a significant milestone for OGDCL, with the potential to enhance both its operational profile and the energy landscape in Pakistan. While the announcement is undoubtedly positive, it is classified as moderate in terms of materiality, given that it does not immediately alter the company's valuation or funding outlook but does provide a foundation for future growth. The successful development of this discovery will be pivotal in determining OGDCL's trajectory in the coming months.

Key insights

• ●Sahito-1 well tested at 17.2 million standard cubic feet per day.
• ●Discovery expected to reduce Pakistan's energy deficit.
• ●OGDCL holds a 95% stake in the project.

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