- ONGC doesn't expect charges on domestic assets in current qtr
- Hasn't decided whether overseas unit will take impairments
The rebound in crude prices will help India’s biggest state-run explorer avoid writedowns that have dragged on profits last year, according to the chairman of Oil & Natural Gas Corp.
The company, which took an 39.94 billion rupee ($600 million) impairment charge in the three months ended Dec. 31 because of oil’s slump, doesn’t predict any “major” provisioning in the current quarter on its domestic assets, Dinesh Kumar Sarraf said in an interview in New Delhi on Tuesday. ONGC hasn’t yet reviewed whether it needs to take writedowns on its overseas operations, he said.
“As oil prices have gone up, I don’t think that there would be a major impairment provisioning so far as our domestic operations are concerned,” Sarraf said. “I can’t rule out the possibility of impairment provision for ONGC Videsh,” he said, referring to the company’s overseas unit.
Crude prices have rebounded from a 12-year low reached earlier this year after Saudi Arabia, Russia, Qatar and Venezuela agreed last month they would freeze output at January levels if other producers followed suit to tackle a global glut. The collapse prompted energy companies around the world from PetroChina Co. to Chevron Corp. to write down assets, slash earnings and cut capital expenditure plans.
ONGC’s impairment charge in the last quarter reduced profit by 26.12 billion rupees, the company said in a statement on Feb. 11. Net income fell to 12.86 billion rupees in the three months ended Dec. 31 from 35.7 billion rupees a year earlier.
Shares of the company have dropped 12 percent this year, a second annual decline after slumping almost 30 percent in 2015. They traded at 212.25 rupees at the close in Mumbai.
If the company has to take writedowns in the current quarter for its overseas operations, it would mostly be due to the impact of lower energy prices, Sarraf said, adding that it’s not currently seeking an initial public offering in ONGC Videsh.
“We don’t think that we should look for an IPO for ONGC Videsh,” he said. “We are not financially distressed to consider an IPO for any of our assets.”
The company is seeking to invest more in Iranian energy assets after international sanctions were removed against the Persian Gulf state, according to Sarraf. Domestic operations contributed 83 percent of ONGC’s oil output during 2014-15 while 17 percent came from its overseas assets. ONGC Videsh has stakes in 36 oil and gas projects across 17 countries from Venezuela to Russia.