After four quarters of decline, ONGC’s standalone profit grew 3 per cent year-on-year in the September quarter. But this was thanks to the weak rupee and not due to improvement in operations.
The company continued to disappoint on the production front, with crude oil output declining marginally and gas sales down around 2 per cent. Net realisation in dollar terms also fell to $44.84 a barrel from $46.76 a year ago, due to higher subsidies provided to oil marketing companies selling fuels below cost. What saved the quarter was the steep fall in the rupee.
Consequently, the company’s realisation per barrel in rupee terms improved almost 8 per cent. This more than offset fall in output and higher subsidy, as also higher depreciation expenses (due to an accounting change) and lower other income.
In contrast to the weak operational performance in the domestic business, ONGC Videsh, the company’s subsidiary engaged in international operations, did well. But the benefit of this will be reflected only in ONGC’s consolidated results.
The weakness in the rupee should continue to aid ONGC’s domestic business, provided the government does not increase its subsidy burden in the coming quarters. The proposed gas price hike from April next year will also aid profits. But growth in domestic output and maintaining momentum in the international business will be important for the stock to regain favour on the bourses.