Opinion
Mint Explainer: How did ONGC double its consolidated net profit in Q1?
Summary
- It was largely due to a 16.9% decrease in its expenses
State-run ONGC reported a 102.6% rise in its consolidated net profit for the first quarter of FY24 at ₹17,383 crore, despite gross revenue falling 10.4% to ₹1.63 lakh crore. Here’s a look at how the public-sector energy giant increased its profits.
Why did ONGC’s revenue decline in Q1?
Its revenue from operations during the period under review was ₹1.63 lakh crore, compared to ₹1.82 lakh crore a year ago. Revenues declined because of the fall in crude prices over the past year. Its net realisation from nominated fields declined 29.5% during the quarter to $76.49 a barrel, from $108.55 a barrel in April-June 2022. Further, the realisation of its joint ventures dropped from $109.60 to $70.64 a barrel.
How did consolidated net profit increase despite the drop in revenue?
ONGC’s consolidated profit surged despite a decline in its revenue due to a 16.9% decrease in its expenses. Total expenses during the first three months of FY24 stood at ₹1.43 trillion, compared to ₹1.72 trillion in FY23.
What was the trend in its crude oil production during the first quarter?
Total crude oil production declined 3.3% on-year to 5.311 million metric tonnes during the June quarter. The company said this was because it had to shut down the Panna-Mukta offshore platform to commission a new crude oil pipeline and modernize its evacuation facilities, and because of the disruption caused by Cyclone Biparjoy in June. "Crude oil wells in southern India had to be stopped as a refinery there stopped receiving oil following a leakage in their pipeline," it said in a statement.
What is the company doing to increase its production?
ONGC said it is implementing well interventions and advancing new well drilling activities to counter the decline in production from some mature and marginal fields. "The current decline in production is temporary and the same will be compensated in upcoming quarters with commencement of additional production from new projects; especially by crude oil production commencement from KG 98/2 in Q3 2023-24," it said.
How are the financials of other state-run oil exploration and production companies?
Oil India Ltd reported a 3.7% rise in net profit for the April-June quarter to ₹1,613.43 crore, from ₹1,555.49 crore in the same period last year. The company attributed this to a 5.3% increase in its crude oil production to 0.820 MMT in Q1 FY24 from 0.729 MMT in the same period last year, coupled with lower operating costs.
