ONGC Q2 net profit up 60% at Rs 8,642 cr, beats forecast

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ONGC Q2 net profit up 60% at Rs 8,642 cr, beats forecast

Oil and Natural Gas Corporation (ONGC) has reported a net profit of Rs 8,642 crore in the second quarter of FY12, a massive growth of 60.4% as compared to Rs 5,389 crore in the corresponding quarter of last fiscal.

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Oil and Natural Gas Corporation (ONGC) has posted a net profit of Rs. 8642.23 crore for the quarter ended September 30, up 60% year-on-year boosted by lower subsidy payments and gains from high crude oil and gas prices.

ONGC is required to partially subsidise crude oil sales to state-run refiners, which in turn sell fuel products at state-set, below-market prices.

Meanwhile, sales for the period also grew 24% at Rs 24058.33 crore

The results are ahead of CNBC-TV18 poll which had estimated the company's profits to be at around Rs 6,715 crore and sales were expected to be around Rs 20,942 crore for the quarter under preview

Analysts attribute the stellar performance of the company to the weak rupee which helped the company make forex gains of over Rs 1,000 crore as gas pricing is done in dollar terms.

Also, ONGC, for whom its Rajasthan project had been a losing proposition because it paid royalty not just on it's 30% share but also on Cairn India's 70% per cent interest, had demanded the royalty be made recoverable.

The company received a re-imbursement from Cairn India over Rs 1,000 crore which boosted its financial performance during the quarter, say analysts.

According to media reports, ONGC has requested the oil ministry to reduce to subsidy sharing burden to 25% from the current 39%. The company has also told the ministry that it has not been able to get significant advantage of the increase in crude prices due to oil subsidy sharing. At the same time, the cost of procurement of oil field services and materials has gone up significantly.

The company is keen to reduce its subsidy burden so that it can achieve its investment targets of Rs 170,000 crore during the 12th five-year plan from internal accruals, which may get hampered

In Q1 of FY12, ONGC paid Rs 12,046 crore as subsidy to compensate oil-marketing companies (OMCs) for losses incurred on the sale of diesel, kerosene and domestic cooking gas below market cost. The explorer sold crude oil during April-June 2011 at $121.29 a barrel. The oil subsidy burden translated into a discount of $72.53 a barrel during this period, which led to a net realisation of just $48.76 a barrel.

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