ONGC posts 16% dip in Q4 net profit

The biggest government-owned company, Oil and Natural Gas Corporation, posted a 16 per cent decline in net profit at Rs 2,627 crore in the fourth quarter of 2008-09, on the back of lower crude oil production during the period. For the year, the company’s net profit declined 3 per cent to Rs 16,126 crore from Rs 16,702 in the previous year.

A further drop in net profit was prevented due to a smaller subsidy payout of Rs 852 crore during the January-April quarter, though the oil and gas producer shelled out Rs 28,225 crore as subsidy-sharing, higher than the Rs 22,001 crore in 2007-08, with oil marketing companies Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum. The decline in profit was despite the highest ever sales income of Rs 63,949 crore, which was up 6 per cent from Rs 60,137 crore in 2007-08.

In the fourth quarter ending March 31, the fall in international crude oil prices saw the company’s gross realisation fall half to $47.85 from $100.37 in January-April 2009. But, the net realisation after a low subsidy sharing, was only little less at $43.4 a barrel, compared to $49.66 last year in the same quarter.

Rising oil prices may increase ONGC’s subsidy burden, with the company estimating a $48 a barrel net realisation on crude oil during the current year, after giving price discounts as part of subsidy-sharing. So far, its gross billing of crude oil in the period starting April 1 has averaged to around $60 a barrel.

ONGC Chairman and Managing Director R S Sharma said the profit declined on account of higher subsidy bill, temporary production shutdown and exceptional provisioning of Rs 860 crore relating to an arbitration dispute concerning the Ravva oil field in Andhra Pradesh, in which Cairn India is an operator.

On losses due to natural gas sale prices which are administered by the government, Sharma said they were expecting an increase in these prices. “We incur a loss of about Rs 2,500-3,000 crore on gas sales, which is over and above the subsidy paid on petroleum products,” said D K Saraf, director (finance) ONGC.

Sharma said having a multiple pricing regime for gas was not good, since consumers lobby to get the cheapest price. “New investments do not get justified at depressed prices,” he said.