Oil & Natural Gas Corp.’s first-quarter profit missed analyst estimates after India’s biggest explorer more than doubled writedowns for digging unsuccessful wells and sold crude at a steeper discount.
Net income rose 19 percent to 47.8 billion rupees ($782 million) in the three months ended June 30 from a year earlier, New Delhi-based ONGC said in a statement yesterday. That missed the 58.5 billion-rupee median estimate of 29 analysts surveyed by Bloomberg. It wrote down 38.3 billion rupees for exploration costs, compared with 15.68 billion rupees a year earlier.
“Higher exploration write-offs took a bite out of ONGC’s profits,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “Without this, the profits could have been closer to expectations.”
The company also gave higher discounts on crude oil it sells to state-owned refiners that market fuels below cost to keep retail prices in check. The discount, on the behest of the Indian government, takes almost half of ONGC’s profit every quarter. Even so, Finance Minister Arun Jaitley is preparing to sell shares in the company to help narrow the nation’s budget deficit to the lowest in eight years.
The explorer gave 132 billion rupees in discounts to refiners including Indian Oil Corp. in the quarter, compared with 126.2 billion rupees a year earlier, according to the statement. Sales rose 13 percent to 218.1 billion rupees.
ONGC slumped as much as 2.2 percent before reversing direction to trade 0.8 percent higher at 405.05 rupees as of 10:33 a.m. The shares have gained 40 percent this year, compared with a 23 percent increase in the benchmark S&P BSE Sensex.
The company hasn’t been able to increase oil and gas production from its Indian fields, some as much as 40 years old, leaving its profits more dependent on crude prices and fluctuations in the rupee.
The net selling price for a barrel of oil, after discounts, increased to $47.15 from $40.33, the company said in the statement.
The price of Brent crude, a benchmark for more than half the world’s oil, averaged 6.2 percent more in the quarter, compared with a year earlier.