ONGC Q3 Preview: Double-digit fall in revenue, profit likely on lower oil realisations, weak rupee

ONGC Q3 Preview: Double-digit fall in revenue, profit likely on lower oil realisations, weak rupee

State-run Oil & Natural Gas Corporation Ltd (ONGC) is likely to report a fall in revenue and net profit for the December quarter, weighed by higher net oil price realisations, a weaker rupee, and lower operating expenses. The company is set to announce its results on January 31.

According to a poll of nine brokerages conducted by Moneycontrol, ONGC’s net profit is expected to decline 16 percent year-on-year (YoY) to Rs 8,997.8 crore, while remaining flat sequentially.

Revenue is projected to drop 10 percent YoY and 7 percent quarter-on-quarter (QoQ) to Rs 31,447.6 crore. EBITDA may see a slight 5 percent rise to Rs 18,038.6 crore but is expected to slip marginally on a sequential basis.

Key metrics expected for Q3:

Crude oil sales volumes: Estimated at 4.54 MMT (-4% YoY, -1% QoQ)

Natural gas sales volumes: Forecasted at 3.9 BCM (-2% YoY, flat QoQ)

Gross crude price realization: $73/bbl (-11% YoY, -7% QoQ)

Net oil price realization (post royalty, windfall tax, cess): $52/bbl (+1% YoY, -3% QoQ)

What factors are driving the earnings?

Volumes: Experts suggest ONGC’s standalone production volumes may remain flat QoQ, as incremental growth from the KG Basin offsets natural declines in legacy fields.

Realisations: Crude oil realisations are likely to decrease in line with global trends, while gas realisations may improve following the notification of premium pricing for new well gas (NWG).

EBITDA Growth: Higher net oil price realisations, a weaker rupee, and reduced operating expenses are key contributors.

Net Realisations: Estimated at $74.7/bbl for oil and $6.5/mmBtu for gas. Upstream is likely to report flattish QoQ EBITDA, with QoQ drop in crude prices compensated by rupee weakness and premium APM gas.

Production Trends: Oil production is projected to decline 2% QoQ (5% YoY), while gas production is likely to remain flat QoQ (down 1% YoY).

What will investors look out for in the Q3 show?

Consolidated earnings will be under scrutiny following robust performance by subsidiary HPCL. Analysts forecast consolidated EBITDA to rise 29% QoQ, supported by improved profitability at HPCL due to stronger marketing margins. Investors will also closely monitor the ramp-up of gas production.

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