ONGC struggles back with 6 per cent rise in net profit

In spite of lower sales due to a decline in production, state-owned explorer Oil and Natural Gas Commission on Thursday posted an almost 6 per cent increase in its second quarter net profit at Rs5,089 crore, helped by a lower subsidy payout and an appreciating rupee.

The rise in net profit comes after four successive quarters of profit fall. Net profit had stood at Rs4,808 crore in the same period a year ago. "Our net realisation after paying for subsidy was $56.42 per barrel as compared to $46.72 last year," chairman R S Sharma said. For the half-year ended 30 September, net profit fell to Rs9,937 crore from Rs 11,444 crore a year ago.

ONGC gave $14 per barrel discount to refiners as subsidy to compensate them for their losses on fuel sales. The subsidy payout at Rs2,630 crore was 79 per cent lower than the Rs12,663 crore outgo in last year's quarter. ONGC reckons its profit would have been higher by Rs1,491 crore if it did not have to pay the subsidy.

The appreciating rupee helped the company in improving realisation in rupee terms from crude sales, which was Rs2,731 per barrel in the quarter against Rs2,041 a barrel a year ago.

But sales declined to Rs15,080 crore from Rs17,407 crore on a dip in production, down by 3.4 per cent at 6.63 million tonnes, as natural decline set in at ageing fields. Gas production was almost unchanged at 6.45 billion cubic metres. ONGC is mainly operating ageing oil fields in their natural decline phase.

The company wrote off Rs475 crore as dry-well expenditure during the quarter towards a well drilled in the Krishna-Godavari basin, raising other expenditure 14 per cent. As a result, the company could report only a minor improvement in operating margins pushing its operating profits 4 per cent higher.