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UBS Investment Research
Oil & Natural Gas Corporation
1 QFY12: Results in line
Event: 1QFY12 results in line with expectations
ONGC reported a 19% YoY increase in its revenues. The PAT of Rs 40.9 bn was
in line with our expectation of Rs 40.9 bn. EBITDA was slightly lower than our
expectation on higher other expenses.
Impact: neutral on the margin
The net realisation of US$48.76/bbl was in line with our expectation but starkly
lower than that of Oil India’s US$ 59.6/bbl. While crude production and sales are
up YoY, they are slightly lower than last quarter. Dry well charges which are more
comparable YoY and are a reflection of exploration success, increased to Rs 18.8
bn compared to Rs 8.7 bn a year ago.
Action: Maintain our estimates given little clarity on subsidy burden
The price hikes and duty cuts for petroleum products were announced towards the
end of the quarter and we expect ONGC’s net realisations to improve providing
upside in future quarters. Further upside to the earnings should come from
ONGC’s JV share in Cairn’s Rajasthan fields, where royalty may become cost
recoverable and production may be ramped up. We have not incorporated this in
our numbers.
Valuation: Maintain DCF based valuation of Rs 385/share
We use a sum-of-the-parts methodology to value the company. We use DCF to
value the domestic business and value the company’s overseas reserves on EV/boe
basis. The subsidy sharing formula remains ad hoc though and hence there could
still be some downside to our realisations.
Oil & Natural Gas Corporation
ONGC is the largest oil exploration and production companies in India. It has
reserves of approximately 1.0bn tonnes of oil and oil equivalent gas. ONGC has
one of the lowest finding, development, and lifting costs, and reasonably high
reserve/production ratios. ONGC is 74% owned by the government of India. It
operates in a regulated market whereby the government controls crude and gas
pricing. Its FY09 revenue was US$23.78bn.
Statement of Risk
Subsidy burden is the main risk for ONGC. The company subsidises crude oil to
the OMCs (Oil marketing companies) which sell petrol, diesel, kerosene and
LPG at lower than market regulated prices. E&P business in general is risky by
nature as the success of exploration is probabilistic.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Oil & Natural Gas Corporation
1 QFY12: Results in line
Event: 1QFY12 results in line with expectations
ONGC reported a 19% YoY increase in its revenues. The PAT of Rs 40.9 bn was
in line with our expectation of Rs 40.9 bn. EBITDA was slightly lower than our
expectation on higher other expenses.
Impact: neutral on the margin
The net realisation of US$48.76/bbl was in line with our expectation but starkly
lower than that of Oil India’s US$ 59.6/bbl. While crude production and sales are
up YoY, they are slightly lower than last quarter. Dry well charges which are more
comparable YoY and are a reflection of exploration success, increased to Rs 18.8
bn compared to Rs 8.7 bn a year ago.
Action: Maintain our estimates given little clarity on subsidy burden
The price hikes and duty cuts for petroleum products were announced towards the
end of the quarter and we expect ONGC’s net realisations to improve providing
upside in future quarters. Further upside to the earnings should come from
ONGC’s JV share in Cairn’s Rajasthan fields, where royalty may become cost
recoverable and production may be ramped up. We have not incorporated this in
our numbers.
Valuation: Maintain DCF based valuation of Rs 385/share
We use a sum-of-the-parts methodology to value the company. We use DCF to
value the domestic business and value the company’s overseas reserves on EV/boe
basis. The subsidy sharing formula remains ad hoc though and hence there could
still be some downside to our realisations.
Oil & Natural Gas Corporation
ONGC is the largest oil exploration and production companies in India. It has
reserves of approximately 1.0bn tonnes of oil and oil equivalent gas. ONGC has
one of the lowest finding, development, and lifting costs, and reasonably high
reserve/production ratios. ONGC is 74% owned by the government of India. It
operates in a regulated market whereby the government controls crude and gas
pricing. Its FY09 revenue was US$23.78bn.
Statement of Risk
Subsidy burden is the main risk for ONGC. The company subsidises crude oil to
the OMCs (Oil marketing companies) which sell petrol, diesel, kerosene and
LPG at lower than market regulated prices. E&P business in general is risky by
nature as the success of exploration is probabilistic.
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