Oil India's Net Profit Declines Owing To Increase In Subsidy Burden

Owing to sharp increase in subsidy burden during the third quarter, Oil India's profit after tax declined by 4% to Rs 903 crore as against Rs 940 crore earned during corresponding quarter last year. During this period company has shouldered Rs 2173.5 crore of subsidy while it was Rs 1949 crore last year, a whooping increase of 11.5%. Due to decline in rupee value against the USD, company's topline spurted by 5.38% to Rs 2897 crore as against Rs 3052 crore earned during quarter ending December 2012. It is important to note that company charges price realisation in USD. 

On the physical performance front also company fared dismally as crude oil production declined by 3% to 0.894 MMT versus 0.674 MMT, while on the gas front it marginally inched by 0.74% to 0.679 BCM. Interestingly gross crude oil realization during first 9 months of FY14 has also seen a sharp declined due to sluggishness in the crude oil prices. It declined from $109/bbl to 106.44/bbl, in spite of the company's net realisation which increased by 4.93% in rupee term due to decline in rupee against the USD. Company's management is hopeful that subsidy burden would remain at the same level as in last 9 months and if it happens then total subsidy will reach around Rs 8000-8500 crore for full FY14, which itself is quite high in comparison to last year. In the 9 month period company incurred total subsidy of Rs 6389 crore and it impacted its bottom line by whooping Rs 3592.82 crore. 

On the other development company has made a significant discovery in Gabon in the third well, where it is an operator. This is the first discovery Oil India has made overseas and company is quite optimistic about its overseas venture and mulling to form a new company in the same line of ONGC Videsh. In the Carababo basin also the company is producing 45bopd from three well's and it will reach 90000 bopd by the end of 2015. Company has also made a domestic discovery in Nagajan, Assam during third quarter. Important to note that company along with OVL has also acquired 10% interest in Videocon Mozambique Rovuma 1 in January and it is quite bullish on this asset.