ONGC net jumps 12% on lower subsidy

CORPORATE SCORECARD

Oil and Natural Gas Corporation (ONGC), the country's largest oil exploration and production company, saw a 12 per cent jump in net profit to Rs 4,611 crore during the first quarter of the current financial year, though analysts were expecting the company to post a 7 per cent decline.

The better-than-expected performance of the company was due to a 29 per cent reduction in its subsidy burden, which also partially offset the adverse impact of the stronger rupee on its revenues, which were down 6 per cent during the rore.

ONGC had a subsidy outgo of Rs Rs 3,649 crore during the quarter as against Rs 5,120 crore in the first quarter of 2006-07. The company's gross realisation from a barrel of crude oil was $71.77, up marginally from $71.39 in the corresponding previous quarter. However, net realisation at $50.21 was much higher than $45 in the comparable previous quarter as a result of lower subsidy burden. 
 

Rs crore	Quarter ended June		% chg
	2006	2007
Net sales	14,603	13,688	-6.27
Other income	420	839	99.76
Expenditure	6,493	5,764	-11.23
OP	8,529	8,761	2.72
Net profit	4,119	4,611	11.94
EPS (Rs)	28.89	21.56	-25.37

"We have budgeted for the rupee value at 41 to a dollar and the realisation from a barrel of crude oil at around $42-43 during the year. If the rupee value keep rising then it could affect us," ONGC Chairman and Managing Director RS Sharma said.

He, however, added that ONGC has a natural hedge against the rupee as a strong rupee means that the revenue losses of the oil marketing companies would be lower which would decrease the subsidy burden on ONGC.

The company's recouped costs were also lower by Rs 476 crore at Rs 1,755 crore.

"ONGC has implemented a new policy which has reduced our depreciation by Rs 278 crore. Moreover, we struck lesser dry wells during the quarter, which reduced our dry well costs," Sharma said.

The strong rupee, however, dented total revenues during the quarter. "The 9.3 per cent rise in the rupee (on a year-on-year basis) has eroded Rs 1,500 crore in our revenues and Rs 900 crore in our profits. If the subsidy burden had not reduced we would have recorded a lower net profit," Sharma said.

The Fortune 500 company "� which recently improved its ranking to 369 from 402 in terms of turnover "� has recorded lower crude oil production during the quarter as a result of processing problems at its Nawagam Desalter plant in Gujarat. This affected oil production in the Mehsana and Ahmedabad fields.

Crude oil production was down to 6.88 million tonne from 6.93 million tonne, which also resulted in lower gross revenues. During the quarter, the company also made five oil and gas discoveries "� three in the north-east and two on the east coast.