Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Oil & Natural Gas Corp Ltd (BOM:500312, Financial) reported a 17.1% increase in net profit for Q2 FY25, reaching INR11,984 crores compared to INR10,238 crores in Q2 FY24.
- The company has successfully reversed the declining trend in its crude oil production, with a 0.7% increase in Q2 FY25 over the same period last year.
- ONGC's Board approved an interim dividend of 120%, amounting to INR6 per share, reflecting strong shareholder returns.
- The government has approved additional investment in OPaL, increasing ONGC's stake to 95.69%, which is expected to enhance sustainability.
- The company has made significant progress in its KG-DWN 98/2 project, with oil production reaching over 25,000 barrels per day and plans to further increase output.
Negative Points
- Sales revenue for Q2 FY25 decreased by 3.5% due to lower crude prices, impacting overall financial performance.
- Consolidated net profit for Q2 FY25 fell by 39.92% compared to the previous year, primarily due to reduced profits from subsidiaries HPCL and MRPL.
- Operating expenditure increased by 4.5% in Q2 FY25, driven by higher activities and maintenance costs.
- The realization of crude in rupee terms decreased by 3.4% in Q2 FY25 compared to the previous year, affecting revenue.
- The company's exploration costs have risen, with an increase of INR631 crores in H1 FY25, impacting profitability.
Q & A Highlights
Q: Can you provide more details on the timeline and ramp-up for the recently awarded contracts at Daman and DSF-II projects?
A: Both projects are expected to be completed by the end of FY26. They will primarily produce gas, with an expected output of five MMSCMD from Daman and four MMSCMD from DSF-II. Drilling will commence once the wellhead platforms are ready, with production starting approximately six months after platform completion. - Vivek Tongaonkar, CFO
Q: How is the new well gas allocation expected to impact production and pricing?
A: New well gas includes output from newly drilled wells and interventions in existing wells. We anticipate a production decline rate of 6-7% due to new gas, with most existing field gas qualifying as new gas over the next 7-8 years. The government has set a 7.5% decline rate as a benchmark, and any production above this will be considered new gas. - Vivek Tongaonkar, CFO
Q: What is the current status and future guidance for the KG-DWN 98/2 project?
A: Currently, we are producing over 25,000 barrels of oil per day from KG 98/2, with a target of reaching 40,000 barrels per day by the end of FY25. Gas production is at 2.5 MMSCMD, expected to increase to 10 MMSCMD by the end of FY25 or early FY26. - Vivek Tongaonkar, CFO
Q: Can you clarify the impact of the new gas pricing on ONGC's financials?
A: The new gas pricing, effective from August 2024, allows for a higher price for new well gas. Currently, 4.68 MMSCMD is priced at $9-$10 per MMBtu, compared to $6.5 for older gas. This pricing applies to gas from new wells and interventions, with the potential to significantly impact revenues as production increases. - Vivek Tongaonkar, CFO
Q: What is the total investment in OPaL, and how will it affect ONGC's financials?
A: ONGC's total investment in OPaL is INR18,365 crores, with INR13,200 crores infused this year. This investment aims to reduce OPaL's debt to around INR14,000 crores. We expect OPaL's performance to improve significantly from FY26 onwards, barring any unforeseen changes in product or feedstock prices. - Vivek Tongaonkar, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
