X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ONGC: Drilling new Highs - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 14, 2003

    ONGC: Drilling new Highs

    The dismantling of APM (administered pricing mechanism) came as cheers to ONGC. The net profit of ONGC for FY03 rose to about Rs 104 bn, an increase of over 68% as compared to FY02. It should be noted that earlier it had to sell crude at subsidized rates (fixed at $16 per barrel). Post APM it is allowed to sell the same at international rates. Backed by market pricing and higher crude, natural gas and other value added products output, ONGC has benefited.

    The production of crude oil by ONGC crossed the 26 million tonne (MT) mark, which was about 5% higher than the last year. The increase came mainly from Bombay high. The re-development projects carried out in 2001 can thus be seen as yielding fruits. In FY03, the production of natural gas at 24.3 billion cubic meter (BCM) and other value added products (3.8 MT) were the highest ever figures.

    If we go back to history, we observe that the net profits of ONGC have risen at a CAGR of about 31% from FY97 to FY03. The profits of ONGC are the highest amongst all the private and public sector companies in India and it is the major contributor to the exchequer of India. Globally, it is the fifth largest Oil and Gas Company in terms of profit.

    On the discovery front, it has made some noticeable discoveries in FY03. The oil and gas find at Vasai west is expected to be around 240 m barrels of oil plus oil equivalents, whereas in case of Laipling-gaon in Assam (oil and gas), it is estimated to be around 100 m barrels. At another discovery of gas made in Rajasthan, the testing has indicated presence of sweet gas with more than 7000 kcal/ m3 calorific value. It has also discovered oil and gas in two blocks in Krishna-Godavari offshore basin. Apart from this, it has discovered oil at Banamali in Assam. In all these cases, seismic survey and exploratory drilling have been accelerated.

    In a continuous effort to become a global player, its wholly owned subsidiary ONGC Videsh Limited (OVL), has made certain achievements in FY03. It concluded the acquisition of 25% stake in greater Nile project in Sudan oil fields. Consequently, ONGC is set to receive 3 m tonnes per annum of crude as a result of this deal. It has also acquired 49% stake in two oil blocks in Libya. It is in talks to acquire equity stake deals in other global fields of Myanmar, Iran, Iraq, South Korea, US and Kazakhstan. The gas property in Vietnam (OVL's 45% stake) started its commercial production in Dec'02, marking the realization coming from hydrocarbons. The firm is in the process of looking at acquiring gas blocks off Tasmania.

    ONGC's acquisition of MRPL, having a refining capacity of 9.7 m tonnes per year, marked the entry of oil and gas exploration major into downstream business of refining of petroleum products. This may add stability to the business, which currently get its revenues from the exploration business. It was eyeing a strategic stake in HPCL, but could not bid because of the regulatory requirements (PSUs are not allowed to bid for HPCL disinvestment). It got a license in FY03 to set up 600 retail outlets. Thus the company is trying to become a fully integrated company.

    In the government's initiative policy to attract private players in the exploration business i.e. NELP (Read NELP: Will the dream materialize?), ONGC has competed with the private and international players and has bagged 37 out of 70 blocks offered till now in the three rounds of NELP. In the third round it was been awarded 13 out of the 23 blocks. It bagged two methane blocks and two more in consortium with Oil India limited out of the five blocks offered.

    It plans to invest aggressively into deep sea drilling, an activity, which involves high cost and high risks. In 2003-04, ONGC is planning to launch retail marketing of transportation fuels, in addition to further upsides in exploration, production and refining. It has plans in place to double its reserves, from 5.8 bn tonnes of oil and oil-equivalent gas, to 12 bn tonnes in a period of 20 years. It is also targeting to improve the recovery level of crude oil from the current 26% to 40%. It plans to source 20 m tonnes per year of oil and gas from equity assets abroad in future.

    All in all, the future looks good for this Oil and Gas giant. The only dampening factor is that its management is in government hands (over 96% stake) and therefore, its focus may see changes from time to time and therefore put pressure on its resources. At Rs 374 the stock is trading at 5.1x FY03 unaudited earnings.

     

     

    Equitymaster requests your view! Post a comment on "ONGC: Drilling new Highs". Click here!

      
     

    More Views on News

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    ONGC: Lower Write-offs Support Performance (Quarterly Results Update - Detailed)

    Nov 3, 2016

    ONGC has announced results for the quarter ended September 2016. The company has reported 10.3 % year on year (YoY) decline in sales, while bottom-line grew 6.3% YoY.

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Impairment Loss Drags Profits (Quarterly Results Update - Detailed)

    Mar 1, 2016

    ONGC Ltd has reported 1.7% year on year (YoY) decline in the topline for the quarter ended December 2015 while the bottomline for the quarter declined 64% YoY

    ONGC: Low subsidy burden improves realizations (Quarterly Results Update - Detailed)

    Nov 26, 2015

    ONGC has reported 1.0% year on year (YoY) growth in the topline for the quarter ended September 2015 while the bottomline for the quarter declined by 11.4% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ONGC SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK ONGC

    ONGC 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE ONGC WITH

    MARKET STATS