High crude oil prices fuel ONGC profit 44%

CORPORATE SCORECARD

Oil and Natural Gas Corporation (ONGC), the country’s largest oil exploration and production company, today reported a higher-than-expected 44 per cent rise in first-quarter profits, buoyed by record-high oil prices.

Net profit increased to Rs 6,636 crore during the quarter ended June 2008, up from Rs 4,611 crore in the year-ago quarter. Turnover rose 47 per cent to Rs 20,123 crore in the three months ended June 2008 from Rs 13,728 crore in the corresponding quarter last year.

“It’s the oil prices. That’s the only reason our net profit rose significantly,” said ONGC Chairman and Managing Director R S Sharma.

During the quarter, the Fortune 500 company sold crude oil at 37.34 per cent higher prices even after giving discounts to oil marketing companies as a part of the government’s subsidy-sharing burden, which more than doubled.

ONGC, which produces 76 per cent of the total oil produced in India and 68 per cent of the total gas, sold crude oil at $69.14 a barrel during the June quarter. The company paid a subsidy of Rs 9,811 crore to oil marketing companies during the quarter, up from Rs 3,649 crore in the same quarter a year ago.

Oil and gas production during the quarter was almost stagnant. “But for the subsidy payout, our net profit would have been higher by Rs 5,497 crore, Sharma said.

The company’s share price on the Bombay Stock Exchange rose 3 per cent to Rs 1,012.50 on Monday on a day the benchmark Sensex rose 0.52 per cent. ONGC declared its results after stock markets closed for the day.

Sharma also said the company welcomed a windfall profit tax as it was “a more transparent, equitable and acceptable system than the current arbitrary system of giving subsidy payouts”.

The company, however, did not give projections for the remaining financial year. “It depends on oil prices,” Sharma said, adding, “Times of two-digit oil prices are gone.”

During the June quarter, ONGC produced 6.41 million tonnes of crude oil, marginally higher than 6.38 million tonnes it produced in the first quarter of the last financial year. It also produced 5.63 billion cubic metres of gas during the quarter, up from 5.5 billion cubic metres in the year-ago quarter.

The company’s board of directors also approved an agreement with Uranium Corporation of India for exploring and mining of uranium, a fuel used in nuclear power plants, in India and overseas.

“We have found promising traces of uranium in various oil and gas wells we have drilled so far. We want to exploit this in collaboration with Uranium Corporation,” Sharma said.

State-owned Uranium Corporation is the only company that is currently allowed to mine uranium in the country. “That is why we have tied up with them,” Sharma said, adding a final agreement will be signed soon.