NEW DELHI/MUMBAI India's biggest explorer Oil and Natural Gas Corporation Ltd posted a 64 percent drop in quarterly profit, hit by a a 40 billion rupees ($584.62 million) one-time impairment charge on producing assets due to a sharp fall in the crude price.
The state-owned company posted a standalone net profit of 12.86 billion rupees ($187.96 million) for the three months ended Dec. 31, compared with 35.71 billion rupees in the year-ago quarter, missing analysts' estimates.
Analysts had estimated a net profit of 36.06 billion rupees.
Net sales fell 2 percent to 183.97 billion rupees against 187.14 billion rupees a year earlier, the company said in a statement on Thursday.
ONGC, however, managed a higher realisation, or income on each barrel of crude oil sold, as the government exempted the company from paying subsidy to state-owned refiners during the December quarter.
Its realisations came in at $44.34 per barrel against $35.52 in the year-ago period. A year ago, the company had given a discount of $40.43 per barrel to the oil refining and marketing companies.
"Profits are down despite higher realisation on crude sales because we have provided 39.94 billion rupees towards provision for impairment," said the company's Chairman and Managing Director D.K. Sarraf.
The company's onshore oil and gas blocks posted a loss of 38.98 billion rupees. Analysts said the impairment taken by the company could be linked to the onshore business.
Sarraf said the company had earmarked 290 billion rupees for capital spending in the fiscal year starting on April 1.
Domestic gas prices are likely to drop 15 percent from April, he said, adding that could curb the company's plans to invest more on developing its high-potential Krishna-Goadavari basin block on the east coast of India.
Domestic gas is currently priced at $4.2 per million metric British thermal units (mmBtu).
ONGC hopes to agree new cheaper drilling contracts for its western offshore fields, two sources involved in the matter earlier told Reuters, in its biggest ever cost-saving drive in response to lower crude prices.
"We are not intending to negotiate service contracts," Sarraf said on Thursday, declining to give details.
($1=68.4200 Indian rupees)
(Reporting by Promit Mukherjee; Editing by Sumeet Chatterjee and Adrian Croft)
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Updated Date: Feb 11, 2016 23:30 PM