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Informist, Saturday, Jan. 25, 2025

 

By Anand JC

 

MUMBAI - The operating profit of Oil and Natural Gas Corp. Ltd. for the December quarter is expected to grow in lower-single digits on the back of lower net crude oil realisation, according to analysts. Falling crude oil prices in the final months of 2024 likely weighed on upstream companies like ONGC, whose primary business is extracting and selling oil.

The Maharatna enterprise is projected to report a net profit of INR 97.85 billion for the December quarter, a consensus of 13 analyst estimates collated by Informist showed. Compared to the same quarter a year ago, ONGC's net profit will likely fall by a only a per cent but sequentially, it may contract 18.4%.

 

Emkay Global Financial Services Ltd's projection of INR 86.86 billion net profit is the lowest, while Nomura Equity Research's estimate of INR 116.70 billion is the highest.

ONGC's revenue from operations for the latest quarter is expected to shrink 8.9% on year to INR 316.82 billion, according to an average of 13 house views. Sequentially, the top line may contract 6.5%. 

The earnings before interest, taxes, depreciation, and amortisation of ONGC for the December quarter is expected to be INR 178.99 billion, based on an average of 11 brokerage estimates. Compared to the same quarter a year-ago, EBITDA could advance 4.3%, but is expected to fall by a per cent sequentially.

 

The state-run exploration and production major contributes to around 70% of India's crude oil and around 84% of natural gas production. Kotak Institutional Equities expects ONGC's overall crude oil sales volumes for the December quarter to be 4.54 million tonnes, down 4% on year, while Motilal Oswal Financial Services expects it to remain flat. Nomura expects ONGC's crude oil sales to decline 3% on year in December, but will hold steady sequentially.

ONGC's gas sales may fall 2% on year to 3.9 billion cubic metres, Kotak Institutional Equities said. Nomura expects them to decline 1% on year.

REALISATION IMPACT 
ONGC's net crude oil realisation in the September quarter was $78 per barrel, and in the December quarter of 2023, it was $81 per barrel. The company's net crude realisation peaked in the June quarter of 2023, at $109 a barrel. Crude oil prices have softened progressively since then, with Brent crude price declining 11% on year, and 7% sequentially in the December quarter.

The free-on-board crude oil price of the Indian basket averaged $73.82 per barrel in the December quarter, as per data from the Petroleum Planning & Analysis Cell. This fall in crude price possibly weighed on ONGC's net crude realisation, analysts say.

The upstream company's operating profit in the final quarter of 2024 is expected to be flattish-to-slightly higher as some increase in crude and gas sales volume could be offset by a tad lower crude realisation, JM Financial Institutional Securities Pvt. Ltd. wrote in a report.

Most brokerage firms expect ONGC's crude oil realisation for the December quarter to be flat. In September, the government scrapped the windfall tax charged on oil companies. While this move was positive, Kotak Institutional does not expect ONGC to see much benefit from it in the quarter.

JM Financial expects ONGC's realisation from gas to be slightly higher sequentially as the realisation from the commodity sold locally at administrative pricing mechanism rates has been capped at $6.5 per million British thermal unit for the past one year. Additionally, authorities reclassified around 5-7% of gas sold at administrative pricing mechanism rates as new well gas, which has a higher realisation of around $9 per million British thermal unit.

When the company discloses its earnings to the exchanges on Friday, investors will monitor updates on the ramp-up of its gas production. Analysts at Motilal Oswal feel a delay in peak oil production from the company's KG Basin and a decline in oil prices below $70 per barrel are the key downside risks.

ONGC disclosed its September quarter earnings after the markets closed on Nov. 11. Between Nov. 12 and Jan. 24, shares of ONGC have depreciated 1.7%. On Friday, shares of the nation's largest oil-producer closed with 2.5% lower on the National Stock Exchange, at INR 256.51.
 

Following are the Oct-Dec earnings estimates for Oil and Natural Gas Corp. Ltd. based on reports from 13 brokerage firms in descending order by the estimate of net profit:

 

Brokerage	Net sales (in INR mln)	Net profit (in INR mln)	EBITDA (in INR mln)
Nomura Equity Research	3,23,700	1,16,700	1,83,900
Elara Securities (India) Pvt Ltd	3,20,479	1,07,541	1,84,312
Kotak Institutional Equities	3,20,572	1,06,445	1,84,762
Anand Rathi Share and Stock Brokers Ltd	3,19,414	1,01,093	---
Dolat Capital Market Pvt Ltd	3,28,200	1,00,100	1,77,600
ICICI Securities Ltd	3,27,200	98,400	1,77,100
Prabhudas Lilladher Pvt Ltd	3,17,400	98,000	1,81,300
Sharekhan Ltd	3,20,780	94,610	---
Motilal Oswal Financial Services Ltd	3,20,781	94,607	1,87,153
YES Securities (India) Ltd	3,21,586	90,144	1,81,602
JM Financial Institutional Securities Pvt Ltd	2,55,056	89,978	1,82,591
Nuvama Wealth Management Ltd	3,16,894.0	87,521	1,64,755
Emkay Global Financial Services Ltd	3,26,588.00	86,860	1,63,805
Average	3,16,819.23	97,846.1	1,78,989.1

End

 

Edited by Vandana Hingorani

 

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