The stock of India’s largest crude producer, Oil and National Gas Corporation (ONGC) opened weak on Tuesday and is currently trading over a percent lower than the previous closing price. This is despite the company reporting a strong results for the June ended quarter. The weakness in the stock price is on three counts. One, the revenue and net profit came in lower than the analyst estimates. Second, the bleak outlook for the crude, given the global recessionary fears, and finally, the windfall tax imposed on domestic crude production and petrol/diesel.
In the June quarter on a standalone basis, ONGC reported 83 per cent increase in revenue to ₹42,321 crore, helped largely by increase in price realisation for crude oil and gas. The net crude realisation per barrel in US dollar was higher by 65.5 per cent at USD 108.54 per barrel, while in the Indian rupee was higher at ₹8,384 per barrel, implying a 73.4 per cent rise compared to the June 2021 quarter.
ONGC net profit up 25% in Q1On a standalone basis, the oil major reported highest ever quarterly profit of ₹15,206 crore in Q1
The gas price realisation rose by a whopping 240 per cent year-on-year to 6.1 per cent in June 2022 period. Operating profit margin improved by 10.6 per cent year-on-year to 58.4 per cent in the April-June 2022 period, helped by higher crude oil realisation. On a consolidated basis, the revenue was higher by 69 per cent at ₹1.82 lakh crore, vis-à-vis April-June 2021 period. The consolidated net profit grew 25 per cent to ₹8,581 crore. The tepid volume growth and profit miss failed to enthuse investors.
Falling crude and rising windfall tax
The global crude prices have been on a slide over the last few weeks with WTI crude correcting from USD 99 per barrel a month ago to USD 89 now. Also, the bleak demand outlook for crude on global recessionary fears is likely to keep the stock of ONGC under pressure.
Further, the government marginally hiked the windfall tax on crude oil beginning August 2, from ₹17,000 per tonne to ₹17,750. This, in a weak pricing and demand environment does not bode well for the ONGC. The continued moderation in the global crude prices will keep the stock price under pressure. However, the withdrawal/revision of windfall tax, if it happens, may be the only silverlining for ONGC’s prospects in the near term.