ONGC Logs Massive Jump in Net Profit as Crude Oil Prices Double

Last week on Friday, Oil & Natural Gas Corporation (ONGC) reported its quarterly results for the quarter ended June 2021, in which its net profit soared nearly seven-fold.

However, the market's reaction to ONGC's steep rise in bottomline was muted as shares of the company opened flat today.

Crude oil prices affect revenues

ONGC reported a nearly 800% rise in net profit to Rs 43.4 bn as compared to Rs 5 bn in the same period last year.

This was because the rise in crude oil prices compensated for a fall in production. Crude oil prices have nearly doubled in the April-June 2021 quarter.

Last year's net profit was low when demand as well as crude prices had plummeted due to coronavirus-related lockdown.

Revenues stood at Rs 230.2 bn, up from Rs 130.1 bn in last year.

EBITDA stood at Rs 121.5 bn, up 106% year on year.

The company reported higher interest costs, which was offset by higher other income.

In a statement, the company said revenues were impacted by low crude oil and natural gas prices due to the Covid-19 pandemic and volatile global crude oil and natural gas markets.

The firm got US$65.59 for every barrel of crude oil it produced and sold in June quarter of 2021-22 as compared to US$28.87 per barrel realisation in April-June 2020.

Brent crude prices have started cooling off from the peak of US$75 per barrel in July to US$70 per barrel.

Here's a table comparing ONGC's earnings on key parameters.

Financial Snapshot

(Rs bn)	Jun-21	Jun-20
Revenues	230.2	130.1
Total Expenses	168.1	126.6
Net Profit	43.4	5.0
Net Realisation (US$/barrel)	65.59	28.87
Net Realisation (Rs/barrel)	4,836	2,190

Data Source: Press Release

Other highlights

Gas price was lower by a quarter at US$1.79 per m British thermal unit.

The company produced nearly 5% less crude oil at 5.4 m tonnes in the quarter while natural gas output was 4.3% lower at 5.3 bn cubic meters (bcm).

Gas offtake was lower due to lower offtake from GAIL, led by shutdowns at the customer end.

The management has guided for gas production potentially at 24.7 bcm for fiscal 2022, while gas production would be lower than earlier guided at 27 bcm for fiscal 2023.

Due to Covid-19, the delays in production at the KG-DWN-98/2 field continue amid restrictions on international movement.

The company has guided that gas production from the field may be ramped up by December 2021, with a further ramp-up expected by June 2022.

Renewable energy push

ONGC is looking at acquisitions in order to have 10 gigawatts of renewable energy capacity by 2024.

Subhash Kumar, ONGC's chairman said renewable seems to be making lots of business sense today and will look at inorganic investment in renewables.

Note that India has set up a target to raise its renewable capacity to 450 gigawatts by 2030 from the current 100. This will cut dependence on thermal power generation and reduce pollution.

ONGC has already signed a MoU with NTPC to study the setting up of offshore wind and other renewable projects in India as well as overseas.

Increase in market share

ONGC has seen its share in India's oil and gas production rise over the last three years.

Recently, the minister of state for petroleum and natural gas said the share of ONGC's crude oil production in the country's total crude oil output has increased from 61.7% in 2019 to 66.5% in 2021.

ONGC had produced 21.1 m tonne out of the national output of 34.2 m tonne in 2019. In 2021, it produced 20.3 m tonne out of the national output of 30.5 m tonne.

Its share in natural gas production in India's total natural gas output increased from 75.3% in 2019 to 77.1% in 2021.

How the stock markets reacted to ONGC's results

ONGC share price opened the day up by 0.5% at Rs 117 on the BSE against its previous close of Rs 116.10.

It rose to Rs 118 in early trade today but fell thereafter to Rs 114.85.

Despite the company's bottomline soaring by over 700%, market's reaction was muted.

ONGC shares have a 52-week high quote of Rs 128.45 touched on 15 June 2021 and a 52-week low quote of Rs 64.15 touched on 29 October 2020.

Over the past year, shares of the company have gained 48%.

At the current price of Rs 116. The company commands a marketcap of Rs 1,459.9 bn.

Check out ONGC's detailed shareholding pattern here.

Rising crude oil and natural gas prices have supported ONGC's share price. International gas prices are also rebounding on recovering demand. Explorers such as ONGC, Oil India, and GAIL (India) benefit from rising gas prices.

Since we are on the topic of crude oil, many are wondering if prices will continue to go up or the rally is about to end.

India's #1 trader, Vijay Bhambwani recorded a video explaining why oil prices won't go to US$100 a barrel.

Vijay thinks the price is being artificially help up and the bull market in energy won't last.

About Oil & Natural Gas Corporation

Maharatna ONGC is the largest crude oil and natural gas company in India contributing around 75% to Indian domestic production.

Crude oil is the raw material used by downstream companies like Indian Oil Corp (IOC), BPCL, and HPCL (subsidiary of ONGC) to produce petroleum products like petrol diesel kerosene naphtha and cooking gas-LPG.

The company's subsidiaries also include ONGC Videsh, MRPL, and ONGC Mangalore Petrochemicals.

The company's oil and gas reserves are located internationally in Russia, Colombia, Vietnam, Brazil, and Venezuela.

For more details about the company, you can have a look at ONGC company factsheet and ONGC quarterly results on our website.

For a sector overview, read our energy sector report.

You can also compare ONGC with its peers.

ONGC vs Petronet LNG

ONGC vs BPCL

ONGC vs IOC

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