ONGC’s profit falls 21% as oil prices slump, output drops

Saket Sundria and Debjit Chakraborty September 07, 2016

MUMBAI (Bloomberg) -- Oil & Natural Gas Corp.’s (ONGC) quarterly profit declined 21% as oil prices slumped and output fell.

Net income at India’s biggest energy explorer dropped to 42.3 billion rupees ($638 million) in the three months ended June 30 from 53.7 billion rupees a year earlier, the New Delhi-based company said in a statement to exchanges. Sales dropped 21% to 176.70 billion rupees.

The state-run explorer is key to Prime Minister Narendra Modi’s goal of increasing the nation’s energy security and reducing import dependence by 10% in the next six years. Declining earnings will weigh on ONGC’s plans to invest billions of dollars to develop oilfields and boost flagging output from aging fields. It could also hinder efforts to add assets in India and overseas.

ONGC sold crude oil to refiners including Indian Oil Corp. at $46.10/bbl in the quarter, compared with $59.08/bbl a year earlier after adjusting discounts to state refiners, according to the statement. The rebate, for selling fuels below cost when oil is expensive, amounted to 10.96 billion rupees in the year-earlier period. The company didn’t give any discounts on crude oil in the quarter ended June 30. ONGC sold gas at $3.06 per MMbtu from $4.66 per MMbtu a year ago.

Benchmark crude

Brent crude, the benchmark for half of world’s crude including India’s, averaged $47.03/bbl in the three-month period ended June 30, 26% lower than a year earlier. The contract traded at $47.16/bbl at 1:44 p.m. in London.

ONGC’s total oil output fell to 6.34 MMt in the first quarter from 6.48 MMt a year ago, while gas production slipped 5.6% to 5.49 billion cubic meters.

The company’s shares rose 2.7% to 244.95 rupees at the close in Mumbai on Wednesday. The stock has risen 1.3% this year, compared with a 11% gain in the benchmark S&P BSE Sensex.