ONGC slams Goldman Sachs' negative report
09 March 2009
The Oil and Natural Gas Commission, stung by criticism from Goldman Sachs (Global Investment Research) about its corporate governance and overseas acquisitions, on Sunday issued a detailed rebuttal of Goldman Sachs' ''negatively slanted'' report that came out last week, saying it was aimed at hurting the company's image.
''A perusal of their report reveals that their analysis is devoid of basic facts and certain analysis is based on non-comparable benchmarks,'' the public sector oil behemoth said in its statement. The company rebutted Goldman Sachs' allegations on a range of issues which included government subsidies, overseas growth strategy and stock performance.
Goldman Sachs had raised various concerns regarding ONGC's operations. Its outlook on ONGC is based on concerns over overseas growth strategy largely being ineffective, unexciting execution track record in domestic business, rising costs in ageing domestic fields, limited focus on cost control, long-running corporate governance issues and structural unattractiveness – lower oil prices and a limited upside from the oil price rebound.
It also said that ONGC was subsidising fuel prices under government orders. Key positive stock catalysts are in government hands and hence unpredictable, it said.
Responding to the ''sell'' recommendation of Goldman, ONGC said that corporate governance remains the highest priority for the management at all times. ''More than adequate disclosures are made on all operational as well as non-operational issues,'' it said.
About subsidy discounts extended to public sector marketing companies, ONGC said, ''Subsidy discounts are applicable to crude produced from nominated blocks only, where there is no production sharing or profit oil sharing with the government.
''Despite subsidy discounts, ONGC's retention price has steadily increased. Hence, we feel minority shareholder's interest is not unduly compromised. Crude prices are steadily giving constant upside to ONGC's revenues.''
