UPDATE 1-India's ONGC profit falls as subsidy costs weigh

Thu Nov 8, 2012 8:31pm IST

Stocks

   

(Adds details, company comments)

* Q2 net profit 58.97 bln rupees vs 60.9 bln estimate

* Profit slips on high subsidy burden, lower crude prices

* ONGC head says subsidy may impact planned expenditure

NEW DELHI, Nov 8 (Reuters) - Indian state-run producer Oil & Natural Gas Corp.'s quarterly profit dropped more than 30 percent because of a sharp rise in the discount it has to give state refiners even as crude prices fell.

ONGC, India's third-biggest company by market value, is forced to subsidise state refineries by selling them crude cheaply so they can supply retail markets at capped prices. The government increased the discount that crude oil suppliers have to give refiners earlier this year.

ONGC's cash could be depleted rapidly if the subsidy stayed at the same level, top officials warned.

"We are only meeting our day-to-day operations," Chairman Sudhir Vasudeva told reporters on Thursday. "This is a matter of concern because our cost of production is increasing."

Net profit fell to 58.97 billion rupees ($1.1 billion) for the second quarter ended September from 86.42 billion rupees in 2011. Analysts had expected net profit of nearly 61 billion rupees, according to a Reuters poll of brokerages.

The cost of the subsidy more than doubled to 123.30 billion rupees while the amount ONGC gets paid per barrel of crude fell to $46.8 per barrel from $82.6 a barrel a year ago.

ONGC needs more than $60 per barrel to fund planned expenditure, Vasudeva said.

ONGC has been investing to maintain output from its old fields and has capital spending plans of around 340 billion rupees both this year and next. It has also been scouting for assets abroad, under pressure from the government to meet rising demand from an economy expected to grow 6.5 percent in 2012.

Shares in ONGC, valued at nearly $42 billion, closed 0.6 percent lower on Thursday, ahead of the results. The stock has risen about 3.5 percent so far in 2012, underperforming a 10.2 percent rise in the sectoral index. (Reporting by Nidhi Verma and Prashant Mehra; Editing by Matthew Tostevin)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
CommunalAward wrote:
Indian regime mysteriously sidelined ONGC (Indian leader) and Cairns (Global leader) and gave KG Gas project to Reliance Industries.

Nov 08, 2012 9:57pm IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Moody's on Inflation

Moody's on Inflation

Persistent inflation hurting India's sovereign ratings - Moody's  Full Article 

Carmichael Project

Carmichael Project

Adani buys Australia coal mine royalty rights from Linc for $145 million  Full Article 

GDP Preview

GDP Preview

Economy likely grew faster in June quarter: Reuters poll.  Full Article 

India-Japan Meet

India-Japan Meet

Modi eyes breakthrough nuclear pact on Japan trip   Full Article 

Monetary Policy

Monetary Policy

BofA says RBI may cut rates by 75-100 bps starting early 2015  Full Article 

Road to IPO

Road to IPO

Mega-IPO to rekindle the 'bromance' behind Alibaba's rise  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage