ONGC: 2QFY11 results in line with expectations:: JPMorgan

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Oil and Natural Gas Corporation Neutral
ONGC.BO, ONGC IN
2QFY11 results in line with expectations



• Strong 2Q earnings: ONGC reported a 2Q profit of Rs53.9bn (up 47%
sequentially, 6% y/y), marginally ahead of our estimates, as the full
benefit of the APM gas price hike along with a lower subsidy payout
accrued this quarter.
• Gas volumes resilient, full impact of gas price hike: ONGC gas
volumes remained resilient (2% q/q decline), with higher output from
domestic fields largely offsetting the effect of the PMT field shutdown.
The full impact of the APM gas price hike flowed through this quarter,
leading to a 41% sequential rise in gas revenues.
• Lower subsidy boosts crude realizations: ONGC's subsidy share of
Rs30.2bn was 45% lower q/q, as overall marketing losses halved this
quarter. Crude realizations were at $62.8/bbl, up from $48.1/bbl last
quarter. Total crude output rose 11% q/q.
• Exploratory program continues: ONGC continued a large exploration
program, resulting in a large dry well write-off (Rs24.4bn) and
consequently higher DDA charges during the quarter.
• Retain Neutral: While we are incrementally more positive on diesel deregulation,
we retain our Neutral.