State-owned Oil and Natural Gas Corp (ONGC) on Monday declared 100 per cent interim dividend and said it has sufficient funds to continue operations in an era of extreme volatility in oil prices.
In a statement, ONGC said its board of directors met on Monday and "declared an interim dividend of Rs 5 per equity share of Rs 5 each."
The government, which owns 62.78 per cent stake in ONGC, will get Rs 3,949 crore in dividend and taxes.
The company further said the sudden and sharp decline in crude oil prices in the last few days had let to a lot of volatility in the sector, hitting share prices of upstream oil and gas producer firms.
The outbreak of coronavirus which dampened global demand and the failure of talks of OPEC+ to arrive at an agreement on production cut has led to a drastic decline in oil prices.
"All these major developments bring in some uncertainty for oil and gas sector and specifically for oil and gas producing companies," ONGC said, adding the decline in oil prices has impacted income of upstream firms.
"Global oil markets are regulated by fundamentals and the prices cannot sustain at such levels for long, as being witnessed today," it said.
ONGC said the right level of prices at which the industry can operate and some sort of an equilibrium can be achieved will restore sooner than later. Historically, in previous instances of sudden oil prices decline, the recoveries have also been sharp and in some cases 'V' shaped.
Stating that the company has performed satisfactorily on production as well as profitability front in the present situation, ONGC said it "has sufficient funds to continue its operations."
"The decline in crude prices has additionally created a need for us to carry out a detailed review of activities to look for opportunities to optimize operating costs to preserve liquidity. The company has already started taking steps to create a detailed strategy to get over this situation if the crisis prolongs," the statement said.
ONGC has a balanced portfolio as it is present across the value chain -- upstream, refining and marketing, and is better positioned to face any headwinds, it said.
"It is felt that while at upstream level, lower oil prices are temporary headwinds, as a Group, in the medium term the company will get a strong boost through a contribution from downstream units. ONGC Group fundamentals continue to be strong and as an integrated group it is far more strongly positioned to face the present situation," it added.
At the meeting on Monday, the board emphasized on the need for a close look at the emerging scenarios and advised to adopt a balanced approach towards capital spending, the statement said.