The largest state-run oil and gas explorer Oil and Natural Gas Corporation (ONGC) reported a 31.8% decline in net profit at Rs 5,897 crore for the second quarter of 2012-13 compared with Rs 8,642 crore during the previous corresponding period. The drop in profit is due to high subsidy payout to oil marketing companies under the subsidy sharing formula devised by the government. The higher subsidy payout may force the debt-free company to borrow funds from the market to meets its expansion plans.
The company paid subsidy to the tune of R12,330 crore for the second quarter of 2012-13 compared with R5,713 crore during the corresponding period last year, an increase of around 116%. This impacted the profit after tax to the tune of R7,103 crore. The half yearly subsidy payout stands at R24,676 crore for 2012-13.
Sudhir Vasudeva, chairman ONGC, said, “The higher subsidy payout is a matter of concern. We have taken up the matter with the Cabinet Secretariat and also with Prime Minister.”
The net-realisation of the company from sale of crude oil stands at $46.80/bbl during the second quarter compared with $82.62/bbl, a variation of $43.4/bbl. The management said that the company should attain a net realisation of $56/bbl to fund its capex plans.
“If we continue to pay higher subsidy, our cash reserve, which at starting of the fiscal was R12,000 crore would drop to nearly R4,500 crore by end of the fiscal. It is a myth that ONGC is sitting up with huge cash,” Vasudeva added.
The company plans to add 48,000 barrels of oil per day and gas of 6.9 mmscmd from its recent Mumbai High North (MHN) platform.
ONGC’s crude output in second quarter declined 5% to 6.5 million tonnes, while the gas output was almost flat at 6.36 billion cubic meters. It expects to increase crude out put to 29.1 million tonnes and gas to 26.45 billion cubic meters by the end of this fiscal.