Mumbai: Oil and Natural Gas Corp reported a 44 per cent rise in quarterly profit but fell short of expectations, hurt by government-imposed discounts on its crude sales to state-run refiners.
India regulates prices of liquefied petroleum gas, kerosene and diesel to keep them in check for the masses, with producers such as ONGC sharing the cost of subsidising state refineries by selling to them at a discount. However, a higher burden from these subsidised sales has squeezed ONGC's margins as it continues an investment programme to boost its overseas interests and maintain output at its ageing domestic fields.
The company's net oil sales billing plunged to an eight-year low of $40.97 a barrel in its 2013/14 financial year, from $47.85 a barrel the previous year. The cost to ONGC of helping to subsidise domestic fuel prices rose 14 percent to 563.84 billion rupees ($9.55 billion) in the year to March 31.
Finance director Aloke Banerjee told reporters that the impact of the higher subsidy costs had been restricted by a drop in spending on the drilling of dry wells and by the rupee's decline against the US dollar.
A fall in the value of the rupee helps ONGC because it bills oil sales in dollars. The state-run company reported a net profit of 48.89 billion rupees in quarter to March 31, up from 33.89 billion rupees a year earlier. Net sales fell 2 percent to 208.81 billion rupees.
Analysts, on average, expected a net profit of 57.27 billion rupees, according to Thomson Reuters StarMine data. Shares in ONGC, India's third-biggest company by market value, were down 3 percent at the market close, ahead of the results announcement. The share price has 36 per cent in the past three months on increasing expectation of a rise in gas prices.
