New delhi: Oil and Natural Gas Corp. Ltd (ONGC), the state-owned oil exploration firm, registered a standalone net profit of Rs2,681.60 crore in the January-March (fourth) quarter of 2006-07, 13% lower from the corresponding period of last year. The net profit fell because of an increase in ONGC’s share of the overall oil subsidy on retail prices of fuel, and higher provisioning on pension and other retirement benefits for its employees. Government-controlled retail prices of petrol, diesel and other petro-products are lower than what they should be.
The company’s sales in the last quarter of 2006-07 were Rs12,396.97 crore, 4.19% higher than the corresponding period of the previous year.
For all of 2006-07, ONGC’s consolidated net profit increased 15% to Rs17,770 crore, and the year’s sales rose 16% to Rs86,276 crore.
ONGC’s board of directors has recommended a final dividend of Rs13 for each equity share for the year 2006-07. Taking into account the interim dividend that has already been paid, the overall dividend for the year is Rs31 for each equity share.
On Monday, ONGC’s share closed at Rs916.60 on the Bombay Stock Exchange, higher by 0.87%.
The company’s performance in the current fiscal has been hit by the appreciation of the rupee against the dollar, which has reduced its rupee realization from domestic sales. But this could be offset with the government asking downstream refiners to bear a larger share of the overall subsidy on retail petro-product prices.
“Rupee exchange rate variation has to be factored in subsidy sharing mechanism. The government is very much open (to the idea). A decision should be in by the second week of July,” said R.S. Sharma, chairman and managing director, ONGC.
The new subsidy sharing formula would bring down the absolute amount of subsidy ONGC will bear in the current fiscal. “The subsidy burden will be lower than last year; I have that assurance,” said Sharma. The outflow on account of subsidy increased by 28% in 2006-07 to $22.11 (Rs1,017 then) a barrel, said Sharma, during the course of a presentation.
ONGC’s growth is linked to the “oil equity” of its wholly-owned subsidiary, ONGC Videsh Ltd (OVL), carrying out overseas oil exploration by buying stakes in oil blocks.
OVL expects to extract about 6 million tonnes (mt) of oil and about 2mt of gas in the current fiscal year, said R.S. Butola, managing director and CEO, OVL. OVL’s realizations are better than the parent company as “we are able to sell at the market price”, said Butola.
The firm will account for about 37% of ONGC’s aggregate investment of more than Rs1 trillion during the 11th Plan (2007-12). OVL plans to invest about Rs9,000 crore a year over this period.
Sharma identified rising exploration and production expenditure, attrition among key employees, and modest pricing of gas according to a government mandated formula as ONGC’s primary concerns.
The tight global market conditions for exploration infrastructure such as oil rigs have prevented ONGC from reaping the full benefit of firm crude prices over the last year.
Its attrition among key employees in 2006-07 increased 115% to 372. ONGC has tried to solve this problem by substantially improving post-retirement benefits of employees, Sharma said.
On the gas prices front, the government is expected to increase prices for producers shortly; this would address the problem of lacklustre returns from gas, he added.
In 2006-07, ONGC’s oil production (excluding that of OVL) increased 9% against the previous year to 26.05mt, while natural gas production dipped marginally to 22.44 billion cubic metres from the previous year’s 22.57 billion cu. m.