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Informist, Thursday, May 22, 2025

--ONGC: Expect incremental 15-20% gas to come from new wells each year 

--CONTEXT: Comments by ONGC management at post-earnings call with analysts 

--ONGC: Spent INR 380 bln from overall FY25 capex on conventional ops 
--ONGC: FY25 PAT fell 12% majorly due to exploratory well write-offs 

By Anand JC and Ishaan Sharma

MUMBAI – Oil and Natural Gas Corp. Ltd. Thursday said its net profit for 2024-25 (Apr-Mar) fell 12% from the previous year mainly due to higher exploratory well write-offs. Of the overall capital expenditure of INR 620 billion for FY25, INR 103 billion was towards exploration operations, up 25% on year, the company told analysts in a post-earnings conference call.

"Exploration in our business is something like an investment," the company's management said. "..unless you explore, you don't find new wells. And unless you get new finds, your future is not assured," it added. Excluding write-offs, the company's net profit would have remained at the same level, the management said. 

Late Wednesday, ONGC reported a net profit of INR 356.1 billion for FY25. For the March quarter, it reported a net profit of INR 64.5 billion, down 35% on year, while its revenue increased only 1% to INR 349.8 billion. Shares of the company ended Thursday's session as the worst performer on the Nifty 50, tumbling nearly 3% to INR 241.67.

The company's production of crude oil on a standalone basis for FY25 increased to 18.56 million tonnes from 18.40 million tonnes a year ago. ONGC said this happened "contrary to general belief and numbers over many years". The company expressed confidence in sustaining this performance by saying that it maintained its dividend level despite a decline in profit. ONGC announced a dividend of INR 1.25 per share for FY25. 

Out of ONGC's overall FY26 capital expenditure, the company spent INR 380 billion on its conventional business, while it infused INR 180 billion into its subsidiary ONGC Petro additions Ltd. This company is a joint venture between ONGC, GAIL (India) Ltd., and Gujarat State Petroleum Corp. Ltd. 

This subsidiary recently gave up its 'only-for-export' tag by exiting from the special economic zone in Dahej in order to tap into the demand in domestic petrochemical market. "We conceived OPaL in 2006 based on the assumption that we will export the product (petrochemical)," the company said. However, around 92-93% of its revenues are coming from the local market. Now that it is not part of the special economic zone, the company won't have to pay a custom duty on products. April onwards, the subsidiary has been saving 8-9% of its overall expense, ONGC said.

The company expects around 15-20% of gas produced every year to come from new well gas. ONGC drilled 578 wells in FY25, a record high for the company. "We have built a high number of exploratory wells and new wells. So this is something which is commercially very sound and also futuristic," the management said. 

Its management also provided a positive outlook on overseas unit. ONGC through its subsidiary ONGC Videsh Ltd. has invested in offshore gas exploration project in Mozambique. As per media reports, the $20 billion 'Offshore Area 1' liquefied natural gas project has been under force majeure since April 2021 due to attack by militants in Northern Mozambique's Cabo Delgado province.

ONGC told analysts that deliveries from this unit should commence in the next three years. "... in Mozambique, work is happening almost now. Any day we expect force majeure to be called off, but work in any case has started in a big way," the company said.

Due to the nature of its operations, the company relies on leased vessels and hydrocarbon transport vessels. ONGC currently has access to roughly 50-70 vessels from the market. As a strategy, the company sees more room to earn a higher profit if they owned these vessels. ONGC said there is a shortage of vessels in the market right now, and acquiring them instead would be a better option.  End

Edited by Akul Nishant Akhoury

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