ONGC - Oil Prices Bite; Result Update Q2FY15:: Edelweiss

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ONGC's headline Q2FY15 PAT at INR54.45bn, down 10% YoY, came in line with estimates. Sales declined 8.7% YoY owing to the 10% fall in net crude oil realisation as global prices dipped by USD7/bbl and drop in oil/gas production by 0.9%/8.7% YoY, respectively. Subsidy burden at USD60.8/bbl declined 5% YoY, while subsidy sharing of INR136.41bn stood lower by 1% YoY.  We forecast ONGC’s volume growth to revive mildly going forward. We believe diesel deregulation will benefit the company on lower under-recovery, which however, will be more than offset by the recent steep correction in crude prices. Moreover, the much-awaited gas price hike is significantly sub-optimal. Management stated that ONGC’s deepwater KG block can add 20mmscmd to production, but is viable at a price exceeding USD6/mmbtu.

Oil production falls on JVs volumes; gas production slumps

Q2FY15 crude production from ONGC’s nominated blocks at 5.56mmt was flat YoY and up 1% QoQ, while oil production from joint ventures (JVs) fell 5.7% YoY and 8.1% QoQ. Total Q2FY15 overall crude production (including JVs) at 6.43mmt fell 0.9% YoY and 0.3% QoQ. Gas production at 5.67bcm shrank 8.7% YoY and 6.1% QoQ. EBITDA of INR108.5bn, was therefore down 9.6% YoY and 13.8% QoQ. Net profit of INR54.45bn was down 10.2% YoY, while up 13.9% QoQ as Q1FY15 was hit by 140% rise in dry well write-offs.

Subsidy declined 1% YoY but increased 3% QoQ

Q2FY15 gross crude realisations fell 6.3% YoY and 6.7% QoQ to USD102.1/bbl, as Brent prices were down 5.3% YoY. Subsidy sharing of USD60.78/bbl, was down 5.3% YoY and 2.5% QoQ. Net realisation fell 8% YoY and 12% QoQ to USD41.35/bbl. Net realisation in INR terms fell 10.1% YoY and 11.1% QoQ to INR2,505/bbl.

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https://www.edelweiss.in/research/ONGC--Oil-Prices-Bite;-Result-Update-Q2FY15/27610.html