Mumbai: Indian state explorer Oil & Natural Gas Corporation (ONGC) said on Monday net profit for its fiscal fourth quarter fell 26%, as a rise in its share of the oil subsidy burden offset higher oil and gas prices.
Earlier this month, the Indian government raised the share of subsidy burden for upstream firms to 38.7% for the March quarter from 33.33% earlier.
“There was lower profit in the quarter due to higher subsidy burden,” Chairman AK Hazarika told reporters.
ONGC said discounts to refiners jumped to Rs 12136 crore ($2.7 billion) for the March quarter from Rs 4999 crore in the same period last year.
Gross realisation from oil sales rose to $108.90 per barrel from $79.15, while net proceeds after subsidies fell to $38.75 a barrel from $51.42.
India allows state-run refiners to set retail prices for petrol, but the government controls the price of diesel, cooking gas and kerosene, which means ONGC must sell crude to those refiners at discounted rates.
Government has said it wants to loosen control of fuel prices, but has found the going difficult after global crude rose nearly 17% in the fourth quarter, on top of a 14% rise the previous quarter.
State-run fuel retailers - IOC, Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL)- last raised petrol prices by 8.6% in mid-May, but these still don’t fully reflect international crude prices.
“There may be a knee-jerk reaction to the results, but the long-term worries are already reflected in the stock. This company would be worth much more without government interference,” said Ambareesh Baliga, chief operating officer at Way2wealth Securities.
Shares in ONGC, valued at nearly $53.4 billion, ended down 1.9% in a weak Mumbai market ahead of the earnings. The stock has declined 13.8% so far in 2011, against a 11.1% fall in the main index.
Q4 net slips
ONGC said net profit for its fourth quarter rose to Rs 2790 crore from 3776 crore, against a forecast of Rs 5040 crore in a Reuters poll of brokerages. Revenue rose 8.3% to Rs 15396 crore.
Last month, Indian energy giant Reliance Industries (RIL) posted a 14% rise in quarterly profit to a record high, but still missed market estimates.
India is the world’s fourth-largest oil importer, importing about 80% of its crude needs. It is scouting for oil and gas assets abroad to meet demand in an economy growing around 8.5%, and to feed its expanding refining capacity.
ONGC, which has led these efforts, plans to submit a bid for a stake in Russia’s Yamal LNG project, jointly with state-run GAIL and Petronet LNG, a top company executive said.
“This project is attractive to us as Russian authorities have given a tax holiday,” ONGC Videsh managing director Joeman Thomas said.
The company may launch a follow-on public offer in the second week of July, chairman AK Hazarika said on Monday, providing a tentative timeline for an issue originally planned for the prior fiscal year.
The government had said it planned to raise up to $2.8 billion in the ONGC share sale as part of a plan to sell stakes in 60 firms over the next few years to cut its fiscal deficit and find funds for social welfare programmes.