ONGC's depleting cash reserves hit exploration spends: Report
This decline in exploratory expenditure comes alongside a steady decline in domestic crude oil production.
November 22, 2019 / 01:05 PM IST
Oil and Natural Gas Corporation's cash and bank balances tanked to Rs 504 crore in March 2019 – according to a report in The Indian Express.
In March 2018, cash and bank balances stood at Rs 1,013 crore while a year earlier it was Rs 9,511 crore.
The freefall in the upstream petroleum major's cash reserves is particularly concerning as it is India's largest oil explorer – accounting for 60 percent of the country’s crude oil production.
While the slide is precipitated by two deals involving ONGC's stake buys in Hindustan Petroleum Corporation Ltd and GSPC, the government has maintained that the company has "sufficient lines of credit from banks and strong access to capital markets" to maintain its working capital requirements.
However, comparative six years data shows ONGC's oil exploration spend steadily decreased by half from Rs 11,687 crore in March 2014 to Rs 6,016 crore in March 2019. The corollary is a steady decrease in domestic crude production, which slipped to 35.68 MMT in FY18 from 38.09 MMT in FY12, it noted.
Additionally, since ONGC lists its exploration and production business as the “predominant cash-generator”, the slip is viewed as negative.
A silver lining here is the company’s developmental wells spend, which kept pace over the past six years, up to Rs 9,362 crore in FY19 from Rs 8,518 crore in FY14.