ONGC Net Beats Estimate as Rupee, Subsidy Counter Oil Slumpby and
Discounts to state-run refiners reduced after diesel freed
Co. got $48.83 for a barrel sold to refiners after discount
Oil & Natural Gas Corp.’s second-quarter profit beat estimates as a weak local currency and lower discounts to refiners countered a slump in crude prices at India’s biggest energy explorer.
Net income fell 11 percent to 48.4 billion rupees ($736 million) in the three months ended Sept. 30 from 54.4 billion rupees a year earlier, the state-owned company said in a statement Friday. The average of 25 analyst estimates in a Bloomberg survey was 46.6 billion rupees. Sales gained 1 percent to 205.6 billion rupees.
New Delhi-based ONGC, which pegs oil sales in dollars, benefited from the local currency, which averaged 6.7 percent lower at 64.895 a dollar in the quarter ended Sept. 30, compared with 60.577 a year earlier. The company also reduced discounts given to state-run refiners including Indian Oil Corp., which sell some of their fuels below cost to make them affordable.
The explorer gave 5.96 billion rupees of discounts to refiners on crude oil sales during the quarter, compared with 136.41 billion rupees a year earlier, according to the statement. The impact of discounts on profit was 3.3 billion rupees, compared with 76.5 billion a year earlier, the company said.
The net selling price for a barrel of oil, after discounts, increased to $48.83 in the quarter from $41.45 a year earlier, the company said in the statement.
Flagging output from aging wells at home has spurred ONGC to look for acquisitions and new reserves overseas. While crude’s slump has led to a rise in assets on offer globally, a decline in earnings is making it tougher for the explorer to fund about 11 trillion rupees of planned projects, including the purchase of a 15 percent stake in a Russian oilfield belonging to OAO Rosneft.
Brent crude, the benchmark for half the world’s oil, plunged to a six-year low in August and averaged about $51 in the last quarter, compared with $104 a year earlier.
“An increase in crude prices will be the only trigger for the stock to perform,” said Dhaval Joshi of Emkay Global Financial Services Ltd. in Mumbai.
The shares gained 0.3 percent to 251.45 rupees at the close in Mumbai. They have dropped 26 percent this year, compared with a 4.5 percent decline in the benchmark BSE S&P Sensex. The earnings were announced after the close of trading.