Top Indian Oil Explorer Sees Profit Rebound After Write Back
A man cycles past ONGC’s Uran plant in Maharashtra. (Photographer: Dhiraj Singh/Bloomberg)

Top Indian Oil Explorer Sees Profit Rebound After Write Back

Oil & Natural Gas Corp. beat the highest analyst estimate for net income for the quarter to March as a recovery in crude oil prices enabled India’s largest oil explorer to reverse some of an earlier impairment.

Net income at the state-run company was 67.3 billion rupees ($910 million) compared with a loss of 32.1 billion rupees a year earlier, according to a filing late Thursday. The mean analyst estimate was for a profit of 35 billion rupees.

The better-than-expected performance was driven by higher crude prices, which boosted realizations from oil sales and the reversal of some write-offs taken over the past year to reflect the valuation of its assets at lower prices.

The company earned an average $58.05 a barrel on oil sold in the quarter, more than 18% higher than a year ago.

Brent crude, a benchmark for ONGC’s oil, rose almost 20% year-on-year during the quarter. The company took a net impairment reversal of 26.13 billion rupees based on “an assessment of future crude oil and natural gas prices”.

It sold gas at $1.79/mmBtu, lower than the company’s average cost of production of $3.7/mmBtu.

On gas, “we think the worst is behind us,” Chairman Subhash Kumar told analysts on a conference call on Friday, adding that prices are likely to increase 50% to 60% in the next revision due on Oct. 1.

ONGC shares were steady at 1:08 p.m. in Mumbai after rising as much as 2.4% in intraday trade. The stock has rallied 50% over the past 12 months.

ONGC plans 295 billion rupees in capital expenditure this financial year to boost oil and gas output. The company expects to maintain its production dominance, contributing 65% of India’s projected output in next three years, Kumar said.

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