Oil & Natural Gas Corp., India’s biggest energy explorer, reported its steepest increase in profit in seven quarters after writedowns from dry wells fell and a lower rupee countered discounts on crude oil sales.
Net income rose 44% to 48.9billion rupees ($829 million), or 5.71 rupees a share, in the fourth quarter ended March 31 from 33.9billion rupees, or 3.96 rupees, a year earlier, the New Delhi-based company confirmed in a stock exchange filing. Sales fell 2.3% to 209 billion rupees.
The discounts ONGC gives to state-run refiners are eroding its cash pile and risking cuts in its 11trillion-rupee spending plan on oil fields and overseas acquisitions by 2030. The explorer is mandated by the government to partly compensate Indian Oil Corp. and other state-run refiners, which sell fuel below cost to help curb inflation in a nation where more than 800 million people earn less than $2 a day.
The rupee’s depreciation and lower writedowns from the drilling of unsuccessful exploration wells helped boost profit, A.K. Banerjee, ONGC’s director finance said at a press conference in New Delhi. The company wrote off 19.06billion rupees during the quarter for dry wells, compared with 41.27billion rupees a year earlier, he said.
ONGC climbed as much as 2.2% to 382.45 rupees in Mumbai today, extending its gain to 32% this year. The benchmark S&P BSE Sensex has gained 15% in the period.
The rupee averaged 61.79 in the quarter compared with 54.17 against the dollar a year earlier. ONGC bills its customers in dollars and its selling price increases when the money is converted into rupees.
“It’s the rupee supporting earnings,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “The fall helped ONGC make up for the higher subsidy it had to bear.”
The currency has increased 1.6% since the beginning of this quarter. The explorer’s discounts on crude oil sales to state refiners increased 32% to 162billion rupees in the quarter from 123.1billion a year earlier, according to the statement. This reduced net income by 91.2billion rupees, ONGC said.
Brent oil in London trading, a benchmark price for more than half the world’s oil, averaged $107.87 a barrel in the three months ended Dec. 31, 4.2% lower than a year earlier.
