Oil & Natural Gas Corp. (ONGC), India’s biggest energy explorer, reported its steepest increase in profit in seven quarters after writedowns from dry wells fell and a lower rupee countered discounts on crude oil sales.
Net income rose 44 percent to 48.9 billion rupees ($829 million), or 5.71 rupees a share, in the fourth quarter ended March 31 from 33.9 billion rupees, or 3.96 rupees, a year earlier, the New Delhi-based company said in a stock exchange filing yesterday. That missed the 54.8 billion-rupee median profit estimate of 27 analysts surveyed by Bloomberg. Sales fell 2.3 percent to 209 billion rupees.
The discounts ONGC gives to state-run refiners are eroding its cash pile and risking cuts in its 11 trillion-rupee spending plan on oil fields and overseas acquisitions by 2030. The explorer is mandated by the government to partly compensate Indian Oil Corp. (IOCL) and other state-run refiners, which sell fuel below cost to help curb inflation in a nation where more than 800 million people earn less than $2 a day.
The rupee’s depreciation and lower writedowns from the drilling of unsuccessful exploration wells helped boost profit, A.K. Banerjee, ONGC’s director finance said at a press conference in New Delhi yesterday. The company wrote off 19.06 billion rupees during the quarter for dry wells, compared with 41.27 billion rupees a year earlier, he said.
The rupee averaged 61.79 in the quarter compared with 54.17 against the dollar a year earlier. ONGC bills its customers in dollars and its selling price increases when the money is converted into rupees.
“It’s the rupee supporting earnings,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “The fall helped ONGC make up for the higher subsidy it had to bear.”
The currency has increased 1.6 percent since the beginning of this quarter. The explorer’s discounts on crude oil sales to state refiners increased 32 percent to 162 billion rupees in the quarter from 123.1 billion a year earlier, according to the statement. This reduced net income by 91.2 billion rupees, ONGC said.
Brent oil in London trading, a benchmark price for more than half the world’s oil, averaged $107.87 a barrel in the three months ended Dec. 31, 4.2 percent lower than a year earlier.