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Expectations of a strong showing in the December quarter saw the ONGC stock gain around 1.9 per cent in Friday's trade, compared with the steep 1.5 per cent fall in the Sensex.
The company, which declared its results after market hours, did not disappoint. For the December 2010 quarter, it more than doubled its profits year-on-year to Rs 7,083 crore (Rs 3,054 crore in the December 2009 quarter). Net sales grew at a relatively modest 21 per cent to Rs 18,586 crore.
Gas Pool Account
In addition to increasing crude oil prices (which improved ONGC's net realisations), and the doubling in APM gas prices last calendar, what significantly benefitted the company's bottom-line was the Rs 1,898 crore received from the Gas Pool Account. Save for this one-time settlement on natural gas dues, the company's profits would have grown by around 70 per cent. The more-than-doubling in the price for gas under the administered pricing mechanism (APM) from $1.79/mBtu to $3.82/mBtu last May, would have helped the company add around Rs 800 crore in the recent December quarter, a benefit not available in the previous period. Excluding this too, ONGC's profits would have grown by a more modest but still quite healthy 44 per cent on a year-on-year basis.
Strong growth (comparable) in the company's sales and profits can be attributable, to a good extent, on the buoyancy in crude oil prices. This helped the oil and gas producing major improve its net realization per barrel of crude oil by 12 per cent year-on-year from $57.69 in the previous year to $64.79. This was despite a 21 per cent hike in the subsidy burden footed by the company to Rs 4,222 crore, as part of the product discounts given to public sector oil marketing companies.
Other income
Besides the above factors, a sharp increase in other income (Rs 669 crore compared with a negative Rs 30 crore) also helped. Further, a 22 per cent decline in depreciation, depletion and amortisation costs to Rs 3641 crore also boosted the bottom line.
In early December, the ONGC stock had gained smartly on the back of a slew of corporate actions announced (stock split, bonus issue and special dividend) in the run-up to the follow-on public offering of the company slated for March 2011. However, since then, the stock has lost heavily (around 16 per cent), compared with the 7 per cent decline in the Sensex.
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