Due to lower crude oil prices, ONGC’s Q3 profit drops 14% to Rs 9,536 crore

Due to a decline in oil and gas prices, the state-owned Oil and Natural Gas Corporation (ONGC) reported a 14% decrease in net profit for the third quarter that concluded on December 31. The firm released a statement stating that its standalone net profit for the third quarter of the 2023–2024 fiscal year, which ran from October to December 2023, was Rs 9,536 crore, 13.7% less than the Rs 11,045 crore earned during the same time in the previous financial year.

The company’s earnings decreased because the price of the crude oil it produced and sold during the quarter dropped 6.4% to USD 81.59 a barrel. Additionally, the price of gas dropped by 24.2% to USD 6.5 per mmBtu. A decrease in the production of natural gas, which is used to create power, fertilizer, compressed natural gas (CNG), and cooking gas pipelined to kitchens, as well as crude oil, which is processed into fuel like gasoline and diesel at refineries, also contributed to decreased profit.

The production of gas decreased by 4.3% to 5.12 billion cubic meters, while the production of crude oil fell by 3.3% to 5.22 million tonnes. In Q3, gross sales dropped by 10% to Rs 34,789 crore.

An 80 per cent second interim dividend, or Rs 4 per share, was authorized by the company’s board. The notification said, “The total payout on this account will be Rs 5,032 crore.” This is on top of the Rs 5.75 per share first interim dividend that was announced in November of last year.

As the realized price of oil declined from USD 97.10 per barrel to USD 75.55 in the first nine months of the current fiscal year, ONGC’s standalone net profit decreased by 24% to Rs 29,767 crore. The actual price of gas was also 5% less, at USD 6.57 per million British thermal unit. Additionally, the nine-month output was less.

“The closure of the Panna-Mukta offshore platforms for the commissioning of a new crude oil pipeline to modernize its evacuation facilities, and Cyclone Biparjoy (in June 2023) disrupting offshore and onshore production were the reasons for the reduction in ONGC’s production output in the first nine months of FY 2023–2024,” the company stated, adding that the production of crude oil in a southern field was hindered as a refinery stopped receiving oil due to a pipeline leak. By executing well interventions and progressing new well drilling operations, ONGC is taking proactive measures to mitigate the drop in output from some of the matured and marginal fields.

The company stated that crude oil production has already started from the KG-DWN-98/2 Block on January 7, 2024, and that “the 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.” According to ONGC, nine oil and gas discoveries were made in the current fiscal year. Out of these findings, five are found offshore, while the rest are found on land.

The start of oil production from the deep-water KG-DWN-98/2 block in the Bay of Bengal was not the only highlight. On October 5, 2023, the Mandapeta field of Rajahmundry Asset achieved the highest gas production level since the field’s inception in 1994. This was made possible by proper well placement and reservoir characterization, high-volume fracking, and timely augmentation of production facilities.

According to ONGC, it has also been given permission to establish a 100% subsidiary firm focused on the gas and green energy industries. The wholly-owned subsidiary firm will focus on LNG, renewable energy (solar, wind, and hybrid), green hydrogen, hydrogen blending, and the biofuels and biogas industries.