ONGC Q2 net profit drops 20% on lower oil prices, output

New Delhi: State-owned Oil and Natural Gas Corporation (ONGC) reported a 20 per cent drop in September quarter next profit on decline in oil prices and lower output.

The company reported a net profit of Rs 10,216 crore in July-September (second quarter of current 2023-24 fiscal year), compared to Rs 12,826 crore earning in the same period last year, a statement said.

This is the second consecutive quarter of a decline in net profit for ONGC, India's top crude oil and natural gas producer. The firm had reported a 34 per cent drop in April-June profit.

ONGC earned USD 84.84 for every barrel of crude oil it produced and sold from nomination fields against a gross realisation of USD 95.50 per barrel last year and USD 76.49 earning in the preceding quarter.

Oil prices globally had risen sharply in April-June 2022, after Russia's invasion of Ukraine led to uncertainties over supply and demand. Rates have this year cooled. They were in the USD 80-90 range in the second quarter.

ONGC Director (Finance) Pomila Jaspal said the main reason for the decline in net profit is lower oil prices.

Also, oil and gas production was slightly lower than last year. This will however reverse in the current quarter (October-December), as the company brings to production a prolific oilfield in the KG basin.

"We will be starting production from KG-DWN-98/2 this month and this will help raise the output and thereby earnings," she said.

Last year, the company had a Rs 1,900 crore reversal of impairment which had boosted earnings. This year there is no such exceptional income.

Crude oil pumped out of below ground and seabed is refined in refineries to produce petrol, diesel and other fuels. Natural gas is used to generate electricity as well as burn kitchen stoves and run automobiles (CNG).

Gross revenue fell 8.2 per cent to Rs 35,162 crore mainly because it realised lower oil prices.

ONGC said crude oil production was 1.9 per cent lower at 4.54 million tonnes, while gas output fell 3 per cent to 5.01 billion cubic meters.

"The reduction in production output can primarily be attributed to decline in some of the matured fields and marginal fields. To counter this decline, ONGC is taking proactive steps by implementing well interventions and advancing new well drilling activities within these fields," the statement said.

Furthermore, in a bid to bolster evacuation capacities and modernize offshore facilities, a shutdown was undertaken in Panna-Mukta for commissioning of a new crude oil pipeline, post taking over from joint venture Partner. The shutdown resulted in a temporary loss of production.

"Another factor impacting production was Cyclone Biparjoy struck in June 2023. This event disrupted both offshore and onshore production operations.

"Further, oil production of a Southern Asset was hampered due to the stoppage of wells caused by the cessation of crude oil receipts by a refinery, following a leak in its pipeline. ONGC, however, acted swiftly and devised an alternate method for the evacuation of crude oil through tankers, thus resuming production," it added.

The current decline in production from matured fields will be compensated in upcoming quarters with commencement of additional production from upcoming projects, which are under various stages of development.

Jaspal said the current decline in production is temporary and the same will be compensated in upcoming quarters with commencement of additional production from new projects; especially by crude oil production commencement from KG-DWN-98/2 in Q3 2023-24.

ONGC said it made five discoveries (02 in Onland and 03 in Offshore) during FY 2023-24 in its operated acreages.