RECOVERING from four consecutive quarters of profit fall, ONGC reported a marginal net profit growth of 6% for the September 2009 quarter taking its quarterly profit beyond Rs 5,000 crore mark, which proved to be its third-best historical performance. A 79% y-o-y drop in its subsidy burden allowing it a 21% higher price for its crude oil and rupee depreciation against the year-ago period were the key reasons.
The portion of under-recoveries that the government of India directed ONGC to share was Rs 2,630 crore for the September 2009 quarter, compared to Rs 12,663 crore in the year-ago period when oil prices had peaked at $147. As a result, the company’s net realisation on sale of crude oil stood at $56.42 per barrel, as against an average of $70.5 in the open market.
ONGC, which is mainly operating ageing oil fields in their natural decline phase, reported a 3.4% decrease in oil output to 6.63 million tonnes while its gas production inched up marginally.
Giving effect to ONGC’s discontinued trading business of MRPL’s products, ONGC’s net sales for the quarter were 2% higher y-o-y to Rs 15,192 crore. The company wrote off Rs 475 crore as drywell expenditure during the quarter towards a well drilled in KG basin increasing other expenditure 14%. As a result, the company could report only a minor improvement in operating margins pushing its operating profits 4% higher. However, an 18% fall in other income and 8% higher depreciation resulted in a flat pre-tax profit. Slightly lower tax rate enabled the company to show an improved profit for the quarter.
Going forward, the company is likely to benefit from a longawaited revision in its natural gas prices, which it sells below cost. Under the administered pricing mechanism (APM), the company sells nearly one-third of India’s total available gas at around $1.8 per million British thermal units (mmBtu). The proposed price revision to $2.6 could boost its annual profit by around Rs 2,200 crore or 11% of its FY09 consolidated profit.
The next three years will also see three of the company’s main diversification projects commissioning — ONGC Mangalore Petrochemicals (OMPL) by mid-2011, ONGC Tripura Power Company by early 2012 and ONGC Petro-additions (OPaL) by end-2012. Besides, the company is also involved in setting up two special economic zones — one in Dahej and other in Mangalore.
The portion of under-recoveries that the government of India directed ONGC to share was Rs 2,630 crore for the September 2009 quarter, compared to Rs 12,663 crore in the year-ago period when oil prices had peaked at $147. As a result, the company’s net realisation on sale of crude oil stood at $56.42 per barrel, as against an average of $70.5 in the open market.
ONGC, which is mainly operating ageing oil fields in their natural decline phase, reported a 3.4% decrease in oil output to 6.63 million tonnes while its gas production inched up marginally.
Giving effect to ONGC’s discontinued trading business of MRPL’s products, ONGC’s net sales for the quarter were 2% higher y-o-y to Rs 15,192 crore. The company wrote off Rs 475 crore as drywell expenditure during the quarter towards a well drilled in KG basin increasing other expenditure 14%. As a result, the company could report only a minor improvement in operating margins pushing its operating profits 4% higher. However, an 18% fall in other income and 8% higher depreciation resulted in a flat pre-tax profit. Slightly lower tax rate enabled the company to show an improved profit for the quarter.
Going forward, the company is likely to benefit from a longawaited revision in its natural gas prices, which it sells below cost. Under the administered pricing mechanism (APM), the company sells nearly one-third of India’s total available gas at around $1.8 per million British thermal units (mmBtu). The proposed price revision to $2.6 could boost its annual profit by around Rs 2,200 crore or 11% of its FY09 consolidated profit.
The next three years will also see three of the company’s main diversification projects commissioning — ONGC Mangalore Petrochemicals (OMPL) by mid-2011, ONGC Tripura Power Company by early 2012 and ONGC Petro-additions (OPaL) by end-2012. Besides, the company is also involved in setting up two special economic zones — one in Dahej and other in Mangalore.
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