* Net profit 30.5 bln rupees vs forecast 47.6 bln
* Net proceeds after subsidy payout rise to $57.69/barrel
* Oct-Dec subsidy cost 35 billion rupees vs 49 bln yr ago
* Subsidy uncertainty to weigh on results, shares
* Shares fall 2 pct ahead of results
(Adds further details, analyst's comments, background)
By Pratish Narayanan and Sanjeev Choudhary
MUMBAI/NEW DELHI, Jan 21 India's Oil & Natural
Gas Corp (ONGC) (ONGC.BO) posted its second straight rise in
quarterly profit on higher oil prices, but uncertainty
surrounding subsidy payments may keep investors shy of the
The group is required to partially subsidise the sale of
fuel to state retailers, which sell petrol and diesel at
government-set prices below the market rate, affecting its
Higher oil prices in the December quarter than a year
earlier lifted ONGC's net proceeds after subsidy payouts,
helping the company's net profit rise 23 percent.
But ONGC operates under a complex government subsidy rule
which means it would have to bear a bigger burden if oil prices
rise further as the global economy recovers, hurting results in
"It does not make sense to venture out into the stock until
there is more clarity on the government policy regarding
subsidies," said Deepak Pareek, an oil and gas analyst at Angel
Net proceeds after subsidy payouts soared 70 percent to
$57.69 a barrel in its fiscal third quarter ended December from
$33.99 a year earlier. [ID:nBMA006820]
ONGC said its subsidy cost in the quarter was 35 billion
rupees ($761 million), compared with 49 billion a year earlier.
It reported a net profit of 30.5 billion rupees for
October-December, up from 24.8 billion a year earlier and
compared with an average forecast of 47.6 billion in a Reuters
A lack of clarity about the government's subsidy rules means
analysts estimates for ONGC are often disparate.
"When oil prices stay at about $65 a barrel, ONGC tends to
benefit, but anything more than that means the subsidy burden
will get much higher," Pareek said.
Oil fluctuated below $78 a barrel on Thursday. [O/R]
Ahead of the results, shares in ONGC, India's second-most
valuable company with a market worth of $56 billion, fell 2
percent to 1,140 rupees in a Mumbai market .BSESN that shed
The shares had risen 0.5 percent during the December
quarter, underperforming a 2 percent rise in the main index
ONGC will invest 21.6 billion rupees in a field off India's
west coast, its chairman said. "The peak envisaged oil
production from the D1 field is expected to be about 36,000
barrels per day during 2010-13," R.S. Sharma said.
Yet the company is likely to fall short of its 2009/10 oil
output target of 25.76 million tonnes by 1 million tonnes, he
said. "Production is declining faster than estimated ...
Production is definitely under a lot of pressure."
Crude oil production fell 3 percent in the December quarter
to 6.7 million tonnes, while natural gas output rose marginally
to 6.45 billion cubic metres. [ID:nBMA006820]
The company decided to abandon 37 wells in the third quarter
and took a related charge of 24.8 billion rupees, Sharma said.
(Editing by Valerie Lee and David Holmes)