ONGC cash balance down to tenth of year-ago level

By: | Published: April 21, 2015 1:27 AM

Firm’s cash balance stands at just Rs 1,000 crore as on March 31, 2015

State-run ONGC’s cash balance came down to less than a tenth of the level a year ago at the end of last fiscal year, due to a combination of factors including a crash in crude oil prices, high burden of oil subsidy and sustained capital spending.

The firm’s cash balance stood at just Rs 1,000 crore as on March 31, 2015 compared with Rs 10,600 crore a year ago. Depleting cash reserve could rob ONGC of the tag of ‘zero-debt’ firm as it may have to borrow funds to meet its capital expenditure programme in 2015-16, say analysts.

“The net realisation in the first nine months of FY15 was just $41.19/barrel (as against $43.77 in the year-ago period) and the capex spent during the year is around Rs 30,000 crore,” one of the directors on the Board of ONGC told FE.

Over the past decade, the PSU explorer had de-leveraged the balance sheet and became almost a zero-debt company. Analysts reckon that an upstream company needs a strong internal cash position to develop its assets, especially for capital-intensive deepwater acreages as well as to fund overseas acquisitions.

ONGC’s cash reserves stood at a record Rs 25,000 crore at the end of FY11.


In the first nine months of FY15, ONGC forked out Rs 36,300 crore (from gross revenues of Rs 61,010 crore) towards compensating government-owned oil marketing companies – IOC, BPCL and HPCL – for selling fuel below market cost. This has adversely impact the explorer’s profit after tax by Rs 20,427 crore in the last fiscal year. The government has lately said that the firm will be free of any subsidy burden for the fourth quarter. FE has recently reported that ONGC and the two other upstream hydrocarbon companies will not have to bear the burden of LPG subsidy in FY16.

ONGC’s capital expenditure in FY14 was Rs 32,509 crore. Dinesh K Sarraf, chairman and managing director of ONGC earlier told FE that the explorer would not cut down capex expenditure programme for FY16, as it has to find more oil and gas. This is in contrary to energy companies cutting spending amid fall in crude oil price.

The cash balance would deplete further and there may be a scenario for ONGC to borrow funds to meet its capital expenditure programme, said a Mumbai-based analyst, who did not wish to be named.

In 2013-14, ONGC net profit increased by 5.6% at Rs 22,095 crore on revenues of Rs 84,201 crore. In FY13, the net profit was Rs 20,926 crore on gross revenues of Rs 83,290 crore. In FY14, ONGC suffered highest-ever oil subsidy bill at Rs 56,384 crore, which impacted its profit before tax by Rs 47,756 crore, while pulled down the profit after tax by Rs 31,524 crore. ONGC targets to spend about Rs 36,000 crore towards its capital expenditure programme in FY16.

Oil prices eased back from midday highs on Monday after Saudi Arabian oil minister Ali al-Naimi said production in the world’s biggest crude exporter would stay near record highs at around 10 million barrels per day (bpd) in April. Brent crude was trading at $63.73 per barrel, down from an intraday peak of $64.34/barrel.

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