Belying market expectations, state-run ONGC on Thursday reported a 19.5% drop in its net profit for January-March 2015 to Rs 3,935 crore against Rs 4,889 crore in the corresponding period a year ago, due to a steep fall in realisations from crude oil sales from joint venture projects like the Barmer field as also write-offs on dry wells. The fall in profit is despite the fact that the explorer did not have to bear any oil subsidy burden in the fourth quarter of FY15 and reported a net realisation of $55.63 per barrel on crude sales against $32.78 a barrel in the same quarter last year.

Total income from operations grew 1.6% to Rs 21,647.5 crore in Q4FY15 compared with Rs 21,313 crore in the year-ago period. Analysts expected the Maharatna firm to report a profit of Rs 5,500 crore or thereabouts after tax in the quarter on revenues of roughly the same level it actually achieved.

The PSU firm’s operating cost rose by Rs 1,278 crore, impacting the profit, and it wrote off Rs 291 crore of exploration expense for drilling wells that did not result in any discovery. In the fourth quarter of FY15, revenue from value-added products was down 35% year-on-year to Rs 1,866 crore.

ONGC has taken up an ambitious target to drill about 1.74 million tonnes of incremental crude oil and 2.98 billion cubic metres (bcm) of additional natural gas in FY16. The PSU explorer produced 22.26 million tonnes of crude oil in FY15, marginally higher from previous year, and 22.02 bcm of gas in the last fiscal year. The additional production in FY16 would come from its fields such as Daman offshore, C26 and Vashishth. The natural gas output would increase to 31 bcm by 2016-17, said Tapas Kumar Sengupta, director (offshore).

“The drop in profit is because of lower price realisation of crude oil in joint venture projects and value-added products, which are linked to global prices, as well as write-offs on dry wells,” said Dinesh K Sarraf, chairman and managing director of ONGC. For all of FY15, the company wrote off about Rs 10,000 crore, of which Rs 2,700 crore was on account of dry wells, Sarraf said.

The chairman said that the outlook for first quarter of FY16 is positive, as it will not have to bear any subsidy burden till a crude oil price of $60 a barrel. The government has rolled out a subsidy-sharing mechanism according to which ONGC, GAIL and Oil India would have to bear no subsidy if the average crude oil price during April-June remains below $60. If the crude oil price is between $60 and $100 a barrel, they would have to shell out 85% of the incremental price towards oil subsidy. The sharing would be 90% if crude crosses $100 a barrel.

ONGC Videsh to hit market

The government is planning to launch initial public offer (IPO) for ONGC Videsh, the overseas arm of ONGC. Currently, OVL is a fully-owned subsidiary of its parent.

“We have received a letter from the ministry on listing of ONGC Videsh,” said an official, who did not wish to be identified. OVL is a ‘Schedule A’ company and may be soon awarded with Navratna tag. It should be a standalone entity, the official added.

However, Dinesh K Sarraf, chairman and managing director of ONGC, said currently there “are no plans before the company” to launch an IPO.

This is not the first time news about listing OVL have arisen. In 2012, a similar proposal was deferred by the company board.

For Updates Check Company News; follow us on Facebook and Twitter