Earnings Outlook
Windfall tax seen cancelling price gains for ONGC
This story was originally published at 12:09 IST on 22 July 2024
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By Rajesh Gajra
MUMBAI – Upstream crude oil and natural gas producer Oil & Natural Gas Corp Ltd's earnings for the quarter ended June are likely to have been hit by subdued crude oil sales volume and a decline in natural gas volume. Lower net realisations from crude oil sales amid stable to higher crude prices and higher windfall taxes would also have hit the state-owned oil and gas production giant's performance.
Sequentially, ONGC is likely to have lost the benefit of a 2% increase in gross crude price realisation at $82.8 per barrel from higher Brent crude prices due to an increase in windfall taxes, resulting in a 2?cline in net oil price realisation, post royalty, windfall tax, and cess to $51 a barrel, according to brokerage Kotak Securities' Institutional Equities Research.
As per the average of the estimates of nine brokerage firms, ONGC's standalone net profit is seen at 86.78 bln rupees in Apr-Jun, down 13.4% on year and 12.1% sequentially. The net profit estimates range from 60.13 bln rupees to 108.66 bln rupees.
The revenue of the crude oil producer is seen at 354.7 bln rupees, up 4.9% on year and 2.4% over the previous quarter. Estimates for the topline range from 340.68 bln rupees to 371.9 bln rupees. The operating profit, as denoted by the earnings before interest, tax, depreciation, and amortisation, is seen ranging from 154.1 bln rupees to 191.6 bln rupees, with an average of 171.11 bln rupees, as per the estimates of eight brokerage houses.
Brokerage Motilal Oswal Financial Services expects ONGC's crude oil sales realisation, net of windfall tax, to remain flat on an annual basis. It pegs crude oil sales volume to be flat on year, and natural gas sales volume to fall by a steep 11%.
On the other hand, YES Securities estimates the natural gas sales volume decline to be limited to 3.3% on year, but expects the sales volume for crude oil to also decline 1.6%. Kotak Institutional Equities expects oil volume to decline 3% on year and gas volume to fall 7%. The brokerage said lower volumes coupled with lower net realisations would cause ONGC's EBITDA to fall 15% on year.
Sequentially, however, the company's EBITDA is seen increasing 7% by Motilal Oswal Financial. The brokerage said this would mainly be on account of a 4% increase in crude oil sales. Kotak Institutional Equities, however, forecasts a 6% sequential decline in EBITDA, owing to lower net oil realisation, a 2?cline in crude oil sales volume, and a marginal decline of 0.5% in gas sales volume.
The company has not yet announced the board meeting date for the approval of its June quarter financials. After the earnings disclosure, investors will monitor the management's comments on KG Basin crude oil production, and updates on ramp-up of natural gas production.
At 1039 IST, shares of ONGC were down 0.7% at 322 rupees on the National Stock Exchange.
Following are the Apr-Jun standalone earnings estimates for ONGC based on reports compiled by Informist from nine brokerage houses:
| Brokerage firm | Net sales | Net profit | EBITDA |
| -------(In mln rupees)------- | |||
| Anand Rathi Share and Stock Brokers Ltd | 364,419 | 88,381 | |
| Elara Securities (India) Pvt Ltd | 348,461 | 82,888 | 154,729 |
| Emkay Global Financial Services Ltd | 349,060 | 81,398 | 154,097 |
| Kotak Institutional Equities | 348,967 | 60,130 | 164,528 |
| Motilal Oswal Financial Services Ltd | 371,900 | 98,300 | 186,600 |
| Nomura Equity Research | 352,400 | 78,900 | 166,500 |
| Nuvama Wealth Management Ltd | 362,575 | 108,663 | 191,600 |
| Prabhudas Lilladher Pvt Ltd | 353,800 | 94,700 | 173,200 |
| YES Securities (India) Ltd | 340,684 | 87,658 | 177,648 |
| Average | 354,696 | 86,780 | 171,113 |
End
US$1 = 83.65 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Avishek Dutta
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