ONGC Profit Falls 40% on Lower Output, Higher Costs

NEW DELHI - India's state-run Oil and Natural Gas Corp. Wednesday posted a sharper-than-expected 40% fall in its fourth-quarter net profit because of lower oil and gas output and higher costs and write-offs.

Net profit for the three months ended March 31 fell to 33.89 billion rupees ($602 million) from 56.44 billion rupees a year earlier. Sales rose 14% to 213.89 billion rupees, mainly because it gave lower discounts to state-run refiners.

The market was expecting a net profit of 47.20 billion rupees on sales of 196.69 billion rupees, according to the average of estimates in a poll of 20 analysts.

The results underscore ONGC's struggle to bring new assets into production and boost output at its ageing wells. The company says it is also suffering due to the discounts it must give to refiners to share their losses from selling fuel products at state-set prices, as this limits the funds available for investments. It hasn't been able to bring any new major fields into production in recent years.

ONGC, which contributes just under two-thirds of India's local crude oil output, said its oil output fell to 5.62 million metric tons from 5.78 million tons a year earlier and natural-gas production declined to 5.58 billion cubic meters from 6.03 bcm. Expenses rose 44% to 182.2 billion rupees.

ONGC gave 123.12 billion rupees of discounts in the January-March quarter, 13% less than what it gave a year earlier. The government had allowed fuel retailers to increase diesel prices several times since September, which reduced their sales losses and allowed ONGC to lower the discounts.

Still, the discounts shaved off 69 billion rupees from the company's net profit, Chairman Sudhir Vasudeva said.

The company wrote off 47.39 billion rupees in the past quarter, related mainly to unsuccessful exploration activities, compared with 35.57 billion rupees a year earlier.

ONGC plans to invest 350.49 billion rupees in the current financial year that began April 1, compared with 295.03 billion rupees last year.

The company is actively looking for hydrocarbon assets overseas to boost production.

In November, an ONGC unit signed an agreement to buy an 8.4% stake in Kazakhstan's Kashagan oil-and-gas field from ConocoPhillips. The Indian government recently approved the deal, but it still needs the clearance of the Kazakhstan government. "Efforts are being made to persuade Kazakhstan to expedite the process," Mr. Vasudeva said.

Copyright (c) 2012 Dow Jones & Company, Inc.


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