Benefiting from rising crude prices, Oil and Natural Gas Corporation Ltd (ONGC) posted a very strong performance for the quarter ending December. The better-than-expected Q3 performance and a rise in crude prices to multi-year highs due to ongoing geopolitical tensions helped ONGC stock prices hit fresh 52-week highs of ₹176.35 on Monday.
The brent prices that averaged at $79.6 a barrel in 3QFY22, marked a rise of 8% sequentially and 80% year-on-year, according to Motilal Oswal Financial Services Ltd (MOFSL) data. This had a positive rub off on ONGC crude oil realisations too. The crude price realisations from its nominated oil fields jump 75.3% year-on-year to $75.73. The rise in domestic gas prices by sharp 62% to $2.90 per MMBtu (million British thermal units), applicable from 1st October and in line with rising international gas prices, helped ONGC further.
However, some decline in oil and gas production did disappoint. Total oil production at 5.451 million metric tons (MMT) declined 3.2% while total gas production at 5.564 BCM (Billion Cubic meters) was down 4.2% year-on-year.
The company attributed the decline in crude oil and gas production to restrictive conditions created by cyclone Tauktae and Covid pandemic. Modification work at Hazira and reservoir issues in S1 Vashistha fields in Eastern Offshore also were cited as reasons for the decline.
The company sales of crude oil and gas at 5.1 MMT of crude oil and 4.3 BCM of gas also came flat sequentially and were slightly down from 5.3 MMT and 4.3 BCM in the year-ago quarter. Analysts at Motilal Oswal Financial Services Ltd said that both were in line with our estimates.
Overall company’s gross revenues at ₹28,474 crore grew 67.3% year-on-year and 17% sequentially. The company’s earnings before interest tax depreciation and amortisation (Ebitda) at ₹15970 Crore almost doubled from ₹8350 Crore in the year-ago quarter. Consequently, its adjusted net profit at ₹8764 crore, also helped by higher other income, was up 596.7% year-on-year.
The company is likely to continue benefiting from higher crude prices in the ongoing quarter too. The crude oil prices are on fire led by geopolitical tension. The outlook on gas prices also remains strong. Analysts expect domestic gas prices to rise further during the next round of review and applicable from 1st April.
As ONGC benefits from higher realisations, however, some decline in oil and gas production is adding to concerns. This keeps analysts cautious too.
Analysts at Yes Securities Ltd said that “ONGC’s stock prices is largely fuelled by high crude oil and natural gas prices, even as its production is on the decline and capital expenditure on the rise, to sustain the falling production”. They continue to believe that the normalization of supplies, in the near term and a push for sustainable renewable energy, in the long run would act as a dampener for crude oil prices.
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