Top India Explorer’s Profit Retreat Continues on Weaker Oil
(Bloomberg) -- Oil & Natural Gas Corp.’s net income declined for an eighth straight quarter as a plunge in oil prices last year hurt the state-run explorer.
Net income slumped about 67% to 13.78 billion rupees ($189.4 million) in the three months ended December from a year earlier, the company said in an exchange filing Saturday. That missed the 22.9 billion-rupee average of estimates compiled by Bloomberg.
- Revenue for India’s biggest explorer contracted 28% to 170.24 billion rupees.
- Prices of Brent crude, a benchmark for ONGC’s oil, dropped almost 28% year-on-year during the quarter. Also, rates of most of its natural gas, decided by the Indian government, dropped 45% to below the production cost.
- Shrinking profits, coupled with lower energy prices, weakened its cash flow from operations. It poses a challenge for the company’s investment plans to expand oil and gas output and make inroads into clean energy. Most of ONGC’s current output is from matured fields.
- The company, which used to be India’s most profitable enterprise until a few years ago, is investing more than 590 billion rupees in 15 projects. ONGC needs to see $40-$45 a barrel oil price for its basic capital expenditure requirements, its finance chief Subhash Kumar said in December. The company is re-looking at its targets for 2030-2040 amid the coronavirus pandemic and the energy transition in general.
- While a weaker rupee against the dollar helps boost ONGC’s sales when converted into the local currency, it also increases interest payments on its dollar-denominated debt. The average exchange rate slipped 3.6% in the quarter compared with the previous year.
- The company earned an average $43.2 per barrel on oil sold during the quarter, 28% less than a year ago. It sold gas at $1.79/mmBtu.
- Total oil output fell 3.3% from a year earlier to 5.63 million tons, while gas production declined 6% to 5.8 billion cubic meters, according to a company statement.
- The company’s profit has been falling year-on-year since the January-March quarter of 2019. It reported a quarterly loss in the fourth quarter of last year.
- ONGC’s board on Saturday approved proposals to acquire a 5% equity in Indian Gas Exchange and create a new unit to focus on its gas and LNG businesses.
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