ONGC’s revenues increased 4% q-o-q to Rs 240 bn, 1.4% below our estimate led by modestly lower VAP sales and realisations.
Q4fY18 results were below our estimates driven by sharply higher operating costs and exploratory write-offs. Consolidated EPS declined 9% to Rs 17.2 in FY18 despite higher volumes and crude price, reflecting sharp increase in provisions /write-offs/DD&A across upstream assets and lower profits from MRPL. The stock prices in subsidy-sharing uncertainty; the management expects a structured mechanism from the government. Add stays with a target price of Rs 200 ( Rs 215 earlier).
Q4FY18 results marred by higher operating costs, statutory levies and exploratory write-offs: ONGC’s revenues increased 4% q-o-q to Rs 240 bn, 1.4% below our estimate led by modestly lower VAP sales and realisations. Ebitda declined 9% q-o-q to Rs 114 bn, 9% below our estimate, impacted by higher operating expenses, levies and employee costs. Higher operating costs were attributed to increase in work-over activities, R&M expenses and a decommissioning provision of Rs 2 bn related to PMT field.
Net income jumped 18% q-o-q to Rs 59.2 bn (EPS of Rs 4.6), 7% below our estimate, boosted by sharp increase in other income due to dividend receipts from HPCL and IOCL. DD&A cost increased 7% q-o-q to Rs 62.8 bn due to higher exploratory write-offs, which was partly offset by write-back on impairment. Crude sales declined 3.8% y-o-y to 5.9 million tons led by 3% fall in own production. Gas sales grew 3.5% y-o-y to 4.8 bcm, ahead of 2.2% growth in production.
Consolidated EPS of Rs 17.2 in FY18, including bleak performance from OVL: Standalone adjusted EPS increased 6% to Rs 15.5 in FY18, driven by (i) 9% growth in gas sales to 19.5 bcm, (ii) 5% increase in VAP sales and (iii) higher oil/VAP realisations, which was partially offset by higher DD&A and exploratory write-offs.
OVL’s Ebitda declined 15% y-o-y to Rs 56.7 bn in FY18. Consolidated reported EPS declined 9% y-o-y to Rs 17.2, further impacted by lower contribution from MRPL. 1% decline in crude sales and 9% growth in gas in FY18; guidance of modest 2-4% growth: ONGC management reduced overall production targets for FY19, while guiding for modest 2-4% growth in oil and gas production to 25.9 mn tons and 25.5 bcm respectively.
Cut FY19-20 EPS estimates by 2-6%: We cut EPS estimates (excluding HPCL) to Rs 20.8 (-2%) for FY2019 and Rs 20.6 (-6%) for FY2020, factoring in (i) higher Dated Brent crude price ($/bbl) at 72.5|67.5, (ii) weaker INR-USD exchange rate, (iii) assumption of 100% windfall tax above $55/bbl, which will restrict subsidy bill for the government and (iv) higher operating costs and DD&A. We retain Add with a revised target price of Rs 200, based on 10X FY2020e EPS plus value of investments.