Oil & Natural Gas Corp., India’s biggest energy explorer, benefited from a weak rupee and a provision writeback to report its biggest profit in nine quarters, surpassing analyst estimates.
Net income rose to 71.3 billion rupees ($1.14 billion) in the three months ended Dec. 31 from 55.6 billion rupees a year earlier, according to a filing yesterday. That beat the 57.7 billion-rupee median of 30 analyst estimates compiled by Bloomberg. Sales fell 1.2 percent to 207.4 billion rupees.
Prime Minister Manmohan Singh’s government requires state-controlled oil explorers ONGC and Oil India Ltd. to bear a larger portion of the subsidy given to state-run refiners for selling fuels below cost. The company paid 137.64 billion rupees in subsidies to the refiners in the quarter, 11 percent more than a year ago.
“The earnings surprise during the quarter is because of the one-off accounting adjustment,” said Dayanand Mittal, a Mumbai-based analyst at Ambit Capital Pvt. “Other than that the earnings are in line with our expectations.”
The New Delhi-based company wrote back 25 billion rupees of tax provisions made in previous quarters on crude oil discounts offered to refiners after contesting their decision to claim tax discounts on crude sales. The ruling on the dispute is pending with the oil ministry. Gross realization on crude sales fell to $108.18 a barrel from $110.13 a year ago.
“In the absence of any further communication from the oil ministry, the company has decided to revise the sales revenue and write back the provision made” until Sept. 30, ONGC said in the statement.
ONGC shares fell much as 0.7 percent to 271.50 and traded at 272.30 as of 9:25 a.m. in Mumbai. The earnings were announced after trading had ended yesterday.
Total costs declined to 129 billion rupees from 141.6 billion rupees a year ago. Income from sources other than its main business rose to 26.6 billion rupees from 12.8 billion a year ago.
A stronger dollar boosted profit by 21 billion rupees as the value of local-currency sales increased, Finance Director Aloke Kumar Banerjee told reporters yesterday in New Delhi. ONGC, which bills its customers in dollars, charged 62.03 rupees to a dollar in the quarter, compared with 54.15 rupees a year ago, he said.
The higher subsidy is eroding the company’s cash reserves and may turn it into a cash-deficit company, Chairman Sudhir Vasudeva said on Sept. 25. ONGC had a cash reserve of 196 billion rupees as of the year ended March 31.