ONGC Q4 Net Down 40% On Subsidy Burden, Declining Prices

State-run oil and natural gas major, ONGC’s net profit declined sharply during Q4FY13 owing to its subsidy burden. In the fourth quarter of FY13, the company earned a net profit of Rs 3387 crore in comparison to that of Rs 5644 crore earned during Q4FY12, marking a whopping 40% drop. Its PAT also came in at Rs 20926 crore against Rs 25123 crore earned during FY12, a decline of 16.7%.

On the other hand, the company’s topline has shown great positivity and sales income has touched Rs 21460 crore in Q4FY13 in comparison to 18976 crore earned during the corresponding period in FY12, a growth of 13.10%. In the whole year too, the topline went up by 8.40% to touch Rs 82552 crore compared to Rs 76130 crore earned in FY12. However, analysts had expected much better numbers from the company, and since it did not manage to fare as well, its valuations will be impacted.

If we look into the subsidy impact on profits, then the impact on PAT during FY13 has gone to the level of Rs 28413 crore while it was at Rs 25535 crore during FY12, an increase of 11.27%. This has really played havoc for the Maharatana in spite of the fact that its topline has improved.

There was yet another interesting development during the year. Though the price of crude had declined during Q4, the post discount crude oil rate of ONGC has shown decent positivity owing to a sharp rise in the dollar rate. In fact, the post discount rate has gone up in dollar terms from USD 44.32 per Bbl in Q4FY12 to USS 50.85 per Bbl during Q4FY13 due to lower discounts, while for the whole year there was a sharp decline in crude oil rates, from USD 54.71 in FY12 to USD 47.84 during FY13. This has really hit company’s bottomline.

As far as the subsidy burden is concerned, the company has shared Rs 12312 crore as subsidy with OMCs during Q4FY12 as against Rs 14170 crore given during Q4FY13. However, during the whole of the year, the subsidy burden increased from Rs 44466 crore in FY12 to Rs 49421 crore in FY13, a rise of 11.10%.

The company’s board recommended a final dividend of Rs 0.50 per share for FY13. On the drilling output front, though the company made 22 discoveries during FY13 (including 12 new prospects and 10 new pools), its domestic crude oil output has declined to 26.12 MMT during FY13 as against 26.92 MMT during FY12. The gas output has also declined from 25.51 BCM in FY12 to 25.33 BCM in FY13, which is really worrying for the petroleum major. On the positive side, ONGC’s reserve accretion has touched an all-time high at 84.84 Mtoe (million tonnes oil equivalent), while its reserve replacement ratio has also gone up to touch 1.84 during FY13 in comparison to 1.79 during FY12.