Oil and Natural Gas Corporation (ONGC) is set to regain its tag of the country’s most profitable company, which it had lost to Reliance Industries Ltd (RIL) during financial year 2010-11.
RIL on Friday declared a net profit of Rs 20,040 crore for the 2011-12, a marginal drop from the Rs 20,286 crore it made in 2010-11. Government owned-ONGC, the country’s biggest oil producing company, had already made net profit of Rs 19,478 crore during the first three quarters of 2011-12.
This ONGC profit was in spite of giving Rs 30,296 crore towards compensating the losses of government oil marketing companies on the regulated sale of diesel, kerosene and domestic cooking gas (LPG). The company was, however, helped by an exceptional income of Rs 3,142 crore from Cairn India, as the royalty ONGC had been paying on the Barmer block in Rajasthan was made cost-recoverable.
ONGC is to declare its fourth quarter and 2011-12 results towards the end of May. “Even if ONGC declares a profit lower than the first three quarters, it will overtake RIL in net profit. This is on a standalone basis. When ONGC declares its consolidated net profit next month, including ONGC Videsh’s performance, it will be quite higher to RIL’s consolidated profit of Rs 19,724 crore,” said investment advisor S P Tulsian.
In 2010-11, RIL reported net profit of Rs 20,286 crore, compared to ONGC’s Rs 18,924 crore. RIL gets most of its revenue from the oil refining and petrochemicals business. ONGC’s main revenue comes from crude oil and gas production, mostly from the blocks nominated by the government. This is why it is made to partly bear the losses of government oil marketers.
RIL’s net profit for the fourth quarter ended March 31 dipped 21 per cent to Rs 4,236 crore, pulled down by pressure on refining margins and gas production. This was an unusual year for the company, as its profits fell for two sequential quarters.
Jagannadham Thunuguntla, head of research at SMC Global Securities, said future performance of RIL would depend on ability to increase gas production from its D6 block in the Krishna-Godavari basin (KG-D6). This had declined 23.5 per cent in 2011-12 and continues to be under pressure. Production from KG-D6 has been adversely impacted by unforeseen reservoir complexities and water ingress in the producing fields, the company said.
Interestingly, both companies have piles of unutilised cash. RIL had cash and cash equivalents of Rs 70,252 crore as on March 31. These are primarily invested in fixed deposits, certificates of deposit with banks, mutual funds and government securities/ bonds. ONGC had cash of Rs 25,000 crore as on December 31 last year.