ONGC profit dives and misses f'cast on crude slump

28 Jan 2009, 1811 hrs IST, REUTERS

Country's largest energy explorer, Oil and Natural Gas Corp (ONGC), missed forecasts as quarterly profit plummeted more than 43 percent, hit by a slump in crude oil prices
and a hefty subsidy bill.

State-run ONGC, which sells oil from domestic output at a big discount to refiners to keep fuel prices low, will in coming quarters see cash flow
blunted by its costly acquisition of Russia-focused Imperial Energy, analysts said.

ONGC's December quarter net profit fell to 24.75 billion rupees ($506 million) from 43.7 billion rupees a year ago. A Reuters poll had predicted net profit of 40.11 billion rupees. "ONGC's net was hit mainly by falling crude, but it missed estimates as the subsidy sharing burden was way higher than consensus," said Prayesh Jain, an analyst with India Infoline.

Jain said he had expected the firm's subsidy burden for the quarter to come in at 30 billion rupees, much lower than the 48.99 billion rupees ONGC reported. It stood at 60.8 billion rupees a year ago. "It's all in the hands of government. It's not a good sign for the stock if we keep seeing subsidy sharing numbers like this one," Jain said.

ONGC, India's third-largest listed company with a market value of $27.4 billion, agreed to pay 1.3 billion pounds for Imperial when oil prices were near $130 a barrel. Crude prices have since dropped back to well below $50. Fiscal third-quarter sales fell 17.8 per cent to 124.36 billion rupees.

Gross realisation from oil sales fell to $59.02 per barrel from $91.41 a year ago, while net proceeds after subsidies fell to $33.99 from $54.74, ONGC said. Oil output dropped to 6.49 million tonnes from 6.62 million tonnes in the year-ago quarter.

"Lower crude, declining production, fuel price cuts are also a concern for ONGC," Jain said. Ahead of the result, ONGC shares closed 3.42 per cent up at 642.25 rupees, while the main BSE index rose 2.81 per cent. Shares in ONGC fell 35.5 per cent in the December quarter, in line with the sector sub-index but underperforming the benchmark index's 25 per cent drop.