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Covid-19 restrictions to shave off 18% of ONGC capex for FY21: Executive

"Capex flow will get pushed to next fiscal," Subhash Kumar said adding FY21 capex would be around Rs 26,500 crore

ONGC | Coronavirus | Lockdown

Press Trust of India  |  New Delhi 

A company official said work stopped temporarily only at two rigs and the remaining 34 in the offshore were operational. He added there was no impact on the company’s production.
Lockdowns in several parts of the world including India restricted movement of labour as well as disrupted supply chains.

State-owned Oil and Natural Gas Corp (ONGC) may see capital spending this fiscal reduce by close to one-fifth after COVID-19 related restrictions delayed projects, its director-finance Subhash Kumar said on Wednesday.

ONGC, India's top oil and gas producer, had budgeted Rs 32,501 crore of capital expenditure for the fiscal to March 2021 (FY21).

But the actual spending may be around Rs 26,500 crore as project implementations got impacted due to COVID-19 restrictions disrupting supply chain and movement of labour, he said at post-first-quarter earnings call with investors.

"There is no conscious effort to reduce but considering the time lost (due to COVID-19 lockdown) and disruption in the supply chain, there may be a loss of around Rs 6,000 crore which would get pushed into next fiscal," he said.

Oil and gas exploration and production projects typically involve the supply of equipment from overseas suppliers. Also, some facilities like rigs are operated by foreign crews.

Lockdowns in several parts of the world including India restricted movement of labour as well as disrupted supply chains.

"flow will get pushed to next fiscal," he said adding FY21 capex would be around Rs 26,500 crore.

On the company's borrowings, the official said there was no immediate plan to raise debt and the recent regulatory filing of board approval for Rs 45,000 crore borrowing pertained to "aggregation" of all previous approvals.

He said the company had raised loans for different purposes including the acquisition of Hindustan Petroleum Corp Ltd (HPCL) in recent years and they all were through separate board authorisations.

So, now an aggregation of all the approvals has been done, he said.

Commenting on ONGC's first-quarter earnings, Sweta Patodia of Moody's Investors Service said, "reported a 50 per cent y-o-y drop in consolidated EBITDA for the quarter ended June 30, 2020, a credit negative."

"The decline in earnings was driven by lower realized crude oil prices which plummeted sharply to around USD 28.7 per barrel from USD 66.3 over the same period," Patodia said.

Earnings were also impacted by lower production volumes which fell around 10 per cent in the current quarter.

"We expect earnings to improve over the next 6-12 months as oil prices have rebounded from the low levels seen in March and have now stabilized around USD 42-45 per barrel," Patodia said.

on Tuesday reported 92 per cent slump in its June quarter net profit after oil prices halved and gas rates fell to a decade low.

The standalone net profit of Rs 496 crore in April-June was 91.7 per cent lower than Rs 5,980 crore net profit a year back.

Revenues dipped 51 per cent to Rs 13,011 crore after a nationwide impacted fuel demand.

Kumar said got USD 28.72 for every barrel of crude oil it sold in the quarter, down from USD 66.32 a barrel in the same period a year back.

Gas price realisation fell 35.2 per cent to USD 2.39 per million British thermal unit.

ICICI Securities said ONGC earnings were hit by a fall in oil and gas realisation, sales volumes, and other income.

"What is encouraging is ONGC remained in the black despite low oil and gas prices," it said.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Wed, September 02 2020. 18:32 IST