ONGC Q4 net profit leaps above estimate

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State-run Oil & Natural Gas Corp's net profit more than doubled in the fourth quarter, as the company benefited from higher crude oil prices and foreign exchange fluctuations.

ONGC, India's third-biggest company by market value, reported net profit of Rs 56.44 billion for its fiscal fourth quarter ended March 31, up from Rs 27.91 billion a year earlier when the cost of subsidies was loaded in the fourth quarter.

Analysts, on average, had expected a net profit of Rs 36.2 billion, according to Thomson Reuters I/B/E/S.

ONGC said net sales rose 22 per cent to Rs 188.19 billion, as the company benefited from the nearly 12 per cent year-on-year rise in its average sale price for crude oil.

ONGC does not fully benefit from rising crude prices because India caps prices of petrol products such as diesel, cooking gas and kerosene and producers such as ONGC share the cost of subsidising refineries by selling crude to them at a discount.

Net realisations from oil sales, after giving discounts to state-run refiners, rose to $44.32 per barrel from $38.75 a barrel a year earlier.

ONGC said its net profit was reduced by Rs 82.1 billion for the quarter by gross discounts of Rs 141.70 billion to state-run refiners. It had given discounts of Rs 121.36 billion a year earlier.

"This year the subsidy payments were higher but were evenly spread, compared to last year when there was a sharp spike in the last quarter," chairman Sudhir Vasudeva told reporters at a press conference after announcing the results.

Gross discounts for the full fiscal year jumped sharply to Rs 444.7 billion, but nearly half of the Rs 249 billion discount in the previous year had been charged in the fourth quarter.

Shares in ONGC have traded nearly unchanged in 2012, underperforming a 6.4 per cent rise in the BSE Sensex. The stock closed 1 per cent, valuing the firm at $39.2 billion, ahead of the results.

ONGC, which has been investing heavily to maintain output from its old fields, has outlined capital expenditure of 330.65 billion rupees in the current financial year, Vasudeva said.

The company has said it aims to raise crude oil production by 15 per cent to 28 million tonnes, or 560,000 barrels per day (bpd), by March 2014.

"We think under-recoveries (shortfall between costs and state-capped retail prices) were at their highest in the quarter, and if there are price increases, ONGC will be a key beneficiary," said Vinay Nair, analyst at Karvy Stock Broking.

"We expect profit in FY13 to be better than the previous fiscal year," he added.

Heavy subsidies on diesel, LPG and kerosene helped push India's fiscal deficit to 5.9 per cent of GDP in the most recent fiscal year, but despite the need to shore up government finances, raising prices is politically fraught for a weakened Congress party-led government.

State oil companies last week raised retail petrol prices by Rs 7.54 per litre, but the government, faced with street protests, is yet to take a decision on diesel, LPG and kerosene.