Oil and Natural Gas Corporation (ONGC), India’s leading upstream oil company, is poised to announce its financial results for the quarter ended March 2024 on May 20. Analysts anticipate a downturn in net profit, primarily attributed to limited net realizations from oil and gas and flat sales volume.
According to Business Headline, the consensus among eight analysts suggests a year-on-year decline of over 11 percent in net profit, estimating it to be approximately Rs 8,434 crore. The anticipated decrease in profit after tax (PAT) is primarily attributed to lower oil and gas production and a reduced administered price mechanism for gas.
Revenue for the fourth quarter of the fiscal year 2024 is expected to marginally decline by 1.11 percent to Rs 34,404 crore. Similarly, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is forecasted to fall by half a percent year-on-year to Rs 17,251 crore. The decline is attributed to lower administered gas prices and reduced oil and gas production by ONGC, albeit partially offset by higher crude oil realizations.
Sales Volume Projections
Motilal Oswal anticipates a 5 percent year-on-year expansion in oil realization (before windfall tax) for ONGC, aligned with Brent movement in Q4FY24. While oil sales volumes are projected to rise by 4 percent year-on-year, gas sales volumes are expected to decline by 2 percent. Additionally, the sales of Value Added Products (VAP) are anticipated to decrease by 4 percent year-on-year.
Impact of Write-offs and Survey Expenses
Kotak Institutional Equities expects a modest 3-5 percent quarter-on-quarter EBITDA growth for upstream firms like ONGC due to lower operating expenses. However, PAT is likely to decline by 14 percent sequentially, attributed to expected higher write-offs and survey expenses in the fiscal fourth quarter.
Oil and Gas Realizations Estimates
JM Financial anticipates ONGC’s Q4FY24 net crude and gas realization to remain largely flat sequentially. Both sales volume and net crude realization are expected to remain steady on a quarter-on-quarter basis.
Margins and Key Monitorables
Nomura and Elara Capital project Q4 margins to be at 50 percent and 48 percent, respectively. Analysts at Motilal Oswal highlight an update on the ramp-up of gas production as a key monitorable in the earnings report, along with post-result management commentary.
ONGC Stock Triggers
Motilal Oswal suggests that the potential operational and financial turnaround at ONGC Videsh Ltd (OVL) could serve as a major share price catalyst for ONGC. Additionally, a successful turnaround at ONGC Petro additions Ltd (OPaL) could potentially add 5-8 percent to the current market price. However, the brokerage cautions against downside risks such as delays in peak oil production from the KG Basin or a decline in oil prices below $75 per barrel.
As ONGC prepares to unveil its Q4FY24 financial results, market analysts foresee a decline in net profits amidst challenging market conditions characterized by limited realizations from oil and gas and flat sales volume. The company’s ability to navigate these challenges and capitalize on potential turnaround opportunities will be closely watched by investors, with key monitorables including gas production ramp-up and post-result management commentary.
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