ONGC gains 1% ahead of March quarter earnings; here's what to expect

Shares of Oil and Natural Gas Corporation (ONGC) rose 1 per cent in the morning deals on the BSE on Tuesday ahead of its March quarter results due later in the day.

At 10:06 am, the stock was up 0.6 per cent at Rs 82.8 on the BSE. In comparison, the S&P BSE Oil & Gas index was trading flat while the benchmark S&P BSE Sensex was up 0.48 per cent at 35,129 levels.

Earlier this month, the state-run company said it was looking at opportunities for optimising its capital and operational expenditures as the coronavirus pandemic has impacted the progress of its projects.

"The short term liquidity position was managed by raising short term borrowings to the extent required. The onset of Covid-19 itself will impact project progress to some extent and the Company is identifying opportunities for Capex and Opex optimisations," it said in a regulatory filing.

For the quarter ended March 2020, Kotak Institutional Equities expects 25 per cent quarter-on-quarter (QoQ) decline in ONGC's EBITDA at Rs 9202.3 crore, led by lower crude realisation at US$51/bbl (-US$11/bbl qoq) and lower price of value-added products. The brokerage notes that gas price was steady sequentially. On year-on-year (YoY) basis, EBITDA is seen declining 25.6 per cent.

Net sales are estimated at Rs 20,952.2 crore, down 21.7 per cent YoY and 11.6 per cent QoQ. Profit before tax (PBT) is projected to fall 28.4 per cent YoY and 33.4 per cent QoQ. Reported PAT (profit after tax) or net profit is seen at Rs 2,922.8 crore, down 27.7 per cent YoY and 29.6 per cent QoQ. EBITDA margin is expected to fall 232 basis points (bps) YoY and 795 bps QoQ to 43.9 per cent.

"We model overall crude oil sales volumes to decline 4 per cent YoY to 5.6 million tons and natural gas sales volumes to decline 5 per cent YoY to 5 bcm, partially impacted by lower off-take during end-March," the brokerage said in an earnings review note.

Edelweiss Securities notes that lower crude prices (-20.6 per cent YoY), lower gas production (-6.3 per cent YoY) and lower gas prices (-3.4 per cent YoY) will lead to a sharp revenue decline of 24.5 per cent YoY at Rs 20,192.5 crore.

It expects earnings before interest, taxes, depreciation, amortisation, and exploration expense (EBITDAX) margins to improve YoY due to operating expenditure (opex) savings leading to a lower 19.3 per cent YoY decline in EBITDAX at Rs 9,988.7 crore. Core PAT (profit after tax) is seen at Rs 2,803.3 crore, down 30.7 per cent YoY and 32.5 per cent QoQ.