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Informist, Thursday, Nov. 7, 2024

By Anand J.C.

MUMBAI – State-owned upstream company Oil and Natural Gas Corp. Ltd. is expected to report a flat September quarter on lower oil and gas production, analysts said. ONGC's operating net profit in the September quarter is expected to decline due to lower on-year oil realisation and flat gas realisation.

An average of 11 analyst estimates pegs the bottom line for the latest quarter at INR 93.68 billion, 8% lower on year. Estimates for the public sector undertaking's net profit vary widely as Nuvama Wealth Management Ltd. expects INR 74.78 billion while YES Securities (India) Ltd. has forecast INR 115.87 billion. ICICI Securities Ltd. sees ONGC's profit after tax rising 4% sequentially but falling 12% on year.

ONGC's revenue from operations in the latest quarter is seen at INR 339.34 billion, as per an average of 11 analyst estimates. The top line is expected to slide 4% sequentially and on year, each. 

As per an average of ten analyst estimates, ONGC's earnings before interest, taxes, depreciation, and amortisation in Jul-Sept is expected to be INR 176.10 billion. ONGC had reported an EBITDA of INR 183.60 billion in the same quarter of the previous financial year and INR 186.20 billion in the June quarter. Analysts at Emkay estimate ONGC's September quarter EBITDA to have fallen 8% sequentially due to lower output, and higher dry well write-offs. Nuvama expects ONGC's September quarter EBITDA to fall 10% on year and 12% sequentially due to a dip in oil production.

CRUDE OIL

ONGC's net crude realisation in the last quarter is expected to be around $76 per barrel (adjusted for windfall tax), as per an average of six estimates. ONGC's oil price realisation, adjusted for special additional excise duty, may increase to $75.8 per barrel in Jul-Sept, ICICI Securities said in its report. This would be the highest since Oct-Dec 2022-23's reading of $76.9 per barrel. However, pre-windfall tax, oil realisation could drop 16% on year, Motilal Oswal Financial Services Ltd. said in a report.

Benchmark crude oil prices play an important role in shaping the financials of Indian upstream companies, as they help align the pricing of the commodity with global market rates. Averaging at $78.7 per barrel in the September quarter, benchmark crude oil prices have reduced 8% on year and 7% sequentially. "The windfall tax of $6 per barrel drags the average realisation (for crude) for ONGC," Nuvama said in a report. Windfall tax on crude oil in the September quarter has been reduced to $5.9 per barrel, down 40.4% on year and 44.7% sequentially.

Prabhudas Lilladher estimates oil production of 5.3 million tonnes in the September quarter, flat sequentially. ONGC’s crude oil production in the September quarter likely declined 2% on year, analysts at Emkay Global Financial Services Ltd. said in a report. Nuvama expects a 1% on-year decline in crude oil production in the latest quarter.

GAS

Analysts expect ONGC's gas realisation to have remained flat in the September quarter on a sequential basis, capped by the government at $6.5 per million metric British thermal unit in April 2023. Emkay and Nuvama expect gas production to have declined 4% on year in the September quarter. ICICI Securities said ONGC's gas production in Jul-Sept might have moderated to 5.0 billion cubic metres, flat sequentially but lower than 5.2 billion cubic metres in the September quarter of FY24 and 5.4 billion cubic metres in the September quarter of FY23.

Higher other income in the September quarter is likely to support the profitability for the upstream player, Yes Securities said in a research report. ONGC in the June quarter reported other income of INR 20.60 billion, up 25% on year. The sales of value-added products are expected to increase 28% on year in the September quarter, per Motilal Oswal. This segment had grown 1.3% in the June quarter and 0.3% in the September quarter last year.

The oil and gas company is a constituent of a sector which is expected to report an earnings contraction of 25.5% in the September quarter, the second lowest after the cement sector in the Nifty 50 universe, estimates by broking firm Sharekhan show. The company will report its September quarter earnings report on Monday. On Thursday, shares of ONGC closed at INR 265.20 on the National Stock Exchange, down 1.4%. 

Following are the Jul-Sept consolidated earnings estimates of ONGC based on reports compiled by Informist from 11 brokerage houses:

End

Edited by Vidhi Verma

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