Volatility in oil prices hits ONGC net profit in Q1

Hit by volatile crude oil prices, Oil and Natural Gas Corporation (ONGC), the country’s largest oil exploration and production company, today reported a 26.94 per cent dip in its net profit for the quarter ended June 30. Net profit for the quarter was Rs 4,848 crore as against Rs 6,636 crore last year. The company’s turnover during the quarter slipped 25.84 per cent to Rs 14,922 crore.

Despite a significantly lower subsidy burden (towards discounts to oil marketing companies for their under-recoveries) of Rs 429 crore during the quarter vis a vis Rs 9,811 crore last year, ONGC’s net realisation on sales dipped 15.7 per cent to $58.25 a barrel.

“The first quarter of last year was exceptionally abnormal due to high crude oil prices. The average price during the first quarter of last year was $125 a barrel, while the average price this year stood at $60 a barrel. This has caused a steep decline in both turnover and profits,” ONGC Chairman R S Sharma said.

The company’s crude oil production during the quarter fell 4.5 percent to 6.12 million tonnes. The company has made nine new discoveries during the quarter, which have been notified to the upstream regulator, Directorate General of Hydrocarbons.

On the price revision of gas sold under the administered price mechanism, Sharma said the issue is likely to come to the Cabinet Committee of Economic Affairs soon.

“Current quarter’s results will depend on oil prices and subsidy. Both of which are not in our hands,” D K Sarraf, director (finance) told reporters. Sharma said crude oil prices would definitely move up. On the issue of royalty burden in Cairn India’s Rajasthan field, where ONGC currently has the obligation to pay entire royalty, Sharma said that he and Petroleum Secretary R S Pandey had a meeting with officials in the finance ministry.