(Adds detail, company exec quotes, analyst comment)
By Devidutta Tripathy and Nidhi Verma
NEW DELHI, June 24 India's Oil & Natural Gas
Corp (ONGC.BO) reported an unexpected 16 percent drop in March
quarter profit, but was bullish on the outlook for the current
fiscal year partly because of possible deregulation of fuel
The state-run firm's profits fell as it helped subsidise
cheap retail fuel prices and as it set aside 8.6 billion rupees
($175 million) as a provision for a matter under arbitration.
"Last year numbers were depressed for very specific
reasons, Chairman and Managing Director Sharma said.
"So, I do feel that those negative pressures will not be
there to that extent during the current fiscal and I see every
reason for the current fiscal year result to be better."
India's re-elected government has said it would look at
deregulating fuel prices. Currently, state-run producers such
as ONGC are forced to subsidise state oil marketing companies
to sell fuel products at below-market prices to consumers.
"It is very much visible that the reformist agenda (of the
government) is very much vocal," said Sharma.
R. S. Butola, managing director of the overseas arm ONGC
Videsh, said recent estimates showed reserves of Russia-focused
Imperial Energy, which ONGC bought last year, were at 946
million barrels, higher than earlier estimates of 920 million
He declined to comment on whether ONGC was interested in
Addax Petroleum AXC.TO AXC.L. On Wednesday, China's Sinopec
Group agreed to buy Addax for about $7.2 billion.
Ahead of the results, shares in ONGC, India's second
most-valuable company with a market capitalisation of $45
billion, rose 2.4 percent in a market that rose 0.7 percent.
"Currently, ONGC is overpriced based on its production
profile," said Amit Shah, a research analyst with BNP Paribas
Securities. Shah currently has a reduce' rating on the stock.
"The structural flaw with the company is its production
inefficiency," Shah said.
The oil and gas explorer said net profit fell 16 percent to
22.07 billion rupees in the March quarter.
In April, a Reuters poll found ONGC was expected to report
a 31 percent rise in net profit to 34.5 billion rupees, based
on an assumption it would not incur subsidy costs.
In late May, the company said it would have a subsidy bill
of 8.52 billion rupees for the quarter, although that was down
90 percent from a year earlier. [ID:nBMA002953]
Turnover in the quarter declined 12 percent to 138.15
billion rupees, and crude oil production in the quarter fell to
6.48 million metric tonnes from 6.95 mmt a year earlier.
ONGC's gross realisations more than halved to $47.85 per
barrel in the quarter as global crude prices fell, and net
realisations fell to $43.40 per barrel from $49.66 a year ago.
Net profit for the year 2008/09 declined 3 percent to
(Writing by Ami Shah; Editing by John Mair)