ONGC Posts Its First Ever Loss In Q4 Due To Covid-Related Disruptions
Gas is flared off from a flame boom aboard DCOR LLC’s Edith offshore oil and gas platform in the Beta Field off the coast of Long Beach, California, U.S. (Photographer: Tim Rue/Bloomberg)

ONGC Posts Its First Ever Loss In Q4 Due To Covid-Related Disruptions

Oil and Natural Gas Corporation Ltd. has posted its first ever quarterly loss due to a one-time adjustment on its books to account for existing and future impact of the Covid-19 pandemic.

Net loss stood at Rs 3,098 crore in the January-March period compared to a profit of Rs 4,226.5 crore in the previous quarter, according to its stock exchange filing. Analyst estimates compiled by Bloomberg had pegged a profit of Rs 2,581 crore.

This is the first quarterly loss for ONGC since it started reporting its financials in 2000.

The unexpected loss was due to a one-time impairment cost of Rs 4,899 crore that the company accounted for during the quarter. This was done after considering possible effects of Covid-19 on the recoverability of the company’s cash-generating units.

  • Revenue fell 9.5% sequentially to Rs 21,456 crore—higher than the estimated Rs 20,557 crore.
  • Operating profit fell 30% to Rs 8,588 crore.
  • Margin narrowed to 40% from 51.9%.

The March quarter was marred with challenges for ONGC even before the nationwide lockdown was implemented to curb the pandemic. A steep slide in crude oil prices after talks between Saudi Arabia-led OPEC and Russia to cut output broke down meant the production cost of crude was higher than the then selling price. The pandemic also resulted in a falling demand for oil.

ONGC earned a net realisation of $49 per barrel of crude compared with $58.24 per barrel in the previous quarter. That, coupled with lower sales volume, hurt profitability. ONGC’s loss would’ve been even bigger had it not been for a Rs 1,641.5-crore deferred tax reversal during the quarter.

The state-run firm said that while refineries did not reduce buying crude oil from ONGC till March 31, there has been a reduction in gas production due to less offtake by customers. Even since March, ONGC said there has been no reduction in demand for crude.

“There were few issues in the delivery of materials as the company’s operations and supply chain is distributed across work centres and projects all over the country,” ONGC said in its filing. “However, it doesn’t affect operations materially and there is no disruption in supply chain management leading to any significant impact on the company's business.”

“As far as some projects are concerned, the supply chain disruption has pushed back the anticipated completion dates,” it said.

Shares of ONGC closed 1.2% lower ahead of the quarterly results while the benchmark BSE Sensex ended trade 0.13% down.

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