KARACHI - The Oil and Gas Development Company Limited (OGDC) is not planning yet to buy the local assets of British Petroleum. The company believes that the deal is not viable in the near term when it is facing liquidity constraints. The company has already acquired 4 new exploration blocks during FY10. The British Petroleum (BP) has been looking to wind up its operations in Pakistan and across different regions. It is also seeking to offload assets in order to finance the worst-ever oil spill, which has affected the business of the company very adversely. We continue to believe that the mounting circular debt is a key concern for OGDC which could limit drilling operations and dividend payout to shareholders going forward. Despite the fact that few new wells and recovery from existing wells would lift FY11 earnings, however, there is a risk attached to the companys near term earnings growth, said Farhan Mahmood, Research Analyst at Topeline Securities. He, while quoting companys management, revealed that the countrys third largest gas field Qadirpur has resumed its production. The field was shut down due to the recent devastating floods. He said regarding Qadirpur compression project, the company has set a deadline to complete the project by September 2010. After the completion, the company expects production from Qadirpur gas field to reach at an optimum level of 650mmcfd which is currently around 460mmcfd. He said companys total receivables from energy companies as of June 30, 2010 stood at Rs83b as compared to Rs56b last year out of which overdue receivables stood at Rs58b (FY09: Rs28b). Major receivables includes from Attock Refinery (FY10: Rs23b, FY09: Rs16b), Pakistan Refinery (FY10: Rs6.7b, FY09: Rs3.7b), SNGPL (FY10: Rs13.6b, FY09: Rs13b) and SSGC (FY10: Rs17.6b, FY09: Rs13b). During FY10, the company received only Rs8.5b related to circular debt. However, the company believes that they will get the payments gradually. We see that the issue is now getting more serious as with government facing huge budget deficit coupled with the flood related expenditures. We believe the circular debt will continue to drain the liquidity of the company as no payments have been received by the company since September 2009, he said. According to analyst, the management has set FY11 target of $800m (Rs68b) which is on the higher side. This includes drilling of 42 wells (exploratory and development wells) while the portion of the capex will also be allocated for buying new rig and few pending projects like Uch 2, Sinjhoro, Tando AllahYar Integrated Project. It seems the company looks optimistic regarding the capex plan. However, the management accepted that in case the circular debt continues to grow they might finance the projects through bank borrowings that can affect earnings in short run, he added.