Wednesday, February 29, 2012

ONGC - OIL & NATURAL GAS COMMISSION - Q3 FY 2012 RESULTS - TO BUY OR NOT - THE ONGC SHARE ISSUE BY GOVT OF INDIA


Oil & Natural Gas Corporation Limited
NSE Symbol        ONGC

OIL & NATURAL GAS COMMISSION has produced below Par results for the third quarter ending Dec,2011. Now, Government is planning to OFFER FOR SALE a part of its equity to the public. In the circumstances, it is pertinent to examine its current financials.

Net Sales in Q3 FY 12 stood at Rs.18123.84 cr – down by (-)19.86% from Q2 FY 12 (previous Qtr); but up by 11.88% from Q1 FY 12 (first Quarter); and down by (-)2.49 from the corresponding Qtr of Q3 FY 11.

Other Oprtng Income in Q3 FY 12 stood at Rs.393.29 cr – up by 27.26% from Q2 FY 12; up by  93.78% from Q1 FY 12; but down by (-)82.27% from Q3 FY 11.

Employees Cost  in Q3 FY 12 stood at Rs.337.05 cr – up by 2.89% from Q2 FY 12; up by  8.8% from Q1 FY 12; and up by 15.69% from Q3 FY 11.

Depreciation in Q3 FY 12 stood at Rs.4531.96 cr – up by        38.25% from Q2 FY 12; up by            9.93% from Q1 FY 12; and up by 24.47% from Q3 FY 11.

Other Expenditure in Q3 FY 12 stood at Rs.7005.48 Cr-down by (-)12.32% from Q2 FY 12; up by      7.06% from Q1 FY 12; and up by  3.11% from Q3 FY 11.

Total Expenditure in Q3 FY 12 stood at Rs.11998.21 cr – up by       2.24% from Q2 FY 12; up by  8.54% from Q1 FY 12; and up by  9.94% from Q3 FY 11.

Profit from Operations in Q3 FY 12 stood at Rs.6518.92 Cr – down by (-)41.75% from Q2 FY 12; up by 21.91% from Q1 FY 12; but down by  (-)34.09% from Q3 FY 11

Other Income     in Q3 FY 12 stood at Rs.958.17 Cr – down by (-)15.43% from Q2 FY 12; up by 31.8% from Q1 FY 12; and up by 43.17% from Q3 FY 11

Exceptional Items Expense in Q3 FY 12 stands at Rs(-)3142.08 Cr.                          

Profit before tax stands at Rs.10617.31 cr – down by (-)13.8% from Q2 FY 12; up by 74.9% from Q1 FY 12; and up by  0.6% from Q3 FY 11.

Tax expense stands at Rs.3875.90 cr in Q3 FY 12;  up by       5.48% from q2 FY 12; up by 96.19% from  Q1 FY 12; and up by  11.66% from Q3 FY 11.

Net Profit stands at Rs.6741.41 cr in Q3 FY 12; down by (-)21.99% from q2 FY 12; up by 64.63% from Q1 FY 12; and down by (-)4.83% from Q3 FY 11.

Face Value of ONGC share is Rs.5 at  present. It was Rs.10 in Q3 FY 11.

Paid Up Equity    stands at Rs.4277.76 cr

Basic EPS stands at Rs.7.88 in Q3 FY 12; Rs.10.1 in Q2 FY 12; Rs.4.79 in q1 FY 12 – all on FV of Rs.5. The EPS was Rs.33.12 on FV of Rs.10 in Q3 FY 11.


OTHER HIGHLIGHTS

I. Under-recovery shoots up by 197% bringing down PAT by 4.8%.

II. Notifies five more discoveries, totaling 20 in the Fiscal Year.

III. ONGC Videsh Limited wins SCOPE Excellence Award

IV. ONGC bags the Best overall Performance PCRA Award for 3rd consecutive year
V. Sales Revenue for 9 m/e Dec,12 is Rs.57,154 Cr against Rs.50,598 Cr in 9 m/e Dec,2010 and Rs.66,152 Cr in FY 2011 full.

VI. Net Profit for 9 m/e Dec,2011 is Rs.19,479 Cr – against Rs.16,133 Cr in 9 m/e Dec,2010 (+21%); and Rs.18,924 Cr in  FY 2011 Full.

Under-recovery Discount (Rs in Cr) is Rs.12,536 cr in q3 FY 12; Rs.4,222 Cr in Q3 FY 11 (197%+); The same was Rs.30,296 cr in 9 m/e Dec,2011 and rs.12,757 cr in 9 m/e dec,2010; and Rs.24,892 cr in FY 2011.

Gross realization (in US$ in bbl) was 111.73 in Q3 FY 12; 89.13 in Q3 FY 11; 116.24 in 9 m/e Dec,2011; 83 in 9 m/e dec,2010; and 89.41  in FY 11.

Realization in Q3 FY 11 included Rs.1898 cr towards receipt from Gas Pool account. But, in current year, only Rs.40 lakhs has been received and balance is yet to be ascertained and received.

Production Performance

Total Crude oil  in MMT is  5.96 in Q3 FY 12; and 6.21 in Q3 FY 11. Fir 9m/e Dec,12, it is 20.34 while it is 20.48 for 9m/e Dec,11.mFor FY 11, the same was 27.28.

Total Gas in BCM was  6.40 in Q3 FY 12; 6.36 in Q3 FY 11; 18.95 in 9 m/e Dec,11; 19.02 in  9 m/e Dec,10; and 25.32 in FY 11.

Total value added products stand at 0.81 for q3 FY 12; 0.78 for Q3 FY 11; 2.33 for 9m/e dec,11; 2.3 for 9 m/3 dec,10; and 3.13 for FY 11.

Since, last Board meeting dt 4-01-2012, five more discoveries have been notified. One in KG shallow offshore basin; another in western onshore basin;  another in Mizoram Basin; another in Sourashtra offshore western off shore basin;  another in western Tripura.

ANNOUNCEMENTS BY ONGC

28-02-2012          Government of India, Ministry of Petroleum & Natural Gas has submitted to the Exchange Announcement with respect to Offer for sale through Stock Exchange Mechanism for sale of 427,774,504 equity shares of Oil & Natural Gas Corporation Limited by The President of India acting through and represented by the Ministry of Petroleum and Natural Gas, Government of India (Seller). Date and time of the opening of the sale : March 01, 2012 at 9:15 am and Date and time of the closing of the Sale : March 01, 2012 at 3:30 pm, Floor Price : Rs. 290 per sale share

08-02-2012          press release dated February 08, 2012 titled "ONGC declares Q3 results. Under-recovery shoots up by 197% bringing down PAT by 4.8%".

04-01-2012          press release dated January 04, 2012, titled " I. ONGC Notifies Four more discoveries totaling 15 in the Fiscal Year; II. ONGC Declares 125 % Interim Dividend ".

02-12-2011          Press Release dated December 02, 2011 titled "ONGC Board flagged off Development of B-127 cluster". 

02-12-2011          Press Release dated December 01, 2011 titled "ONGC notifies two impressive discoveries" 

07-11-2011          press release with respect to the following: (1) ONGC improves Q2 Net by 60.4% (2) Notifies one more discovery in Oct'11 totaling 9 in the year. 

28-09-2011          "ONGC Board decides to issue NOC to Cairn India Ltd for their proposed Transaction of shares with Vedanta Resources PLc".

OFFER FOR SALE OF ONGC SHARES

BY GOVT OF INDIA

The annual EPS of ONGC for FY 12 is likely to be around Rs.31.

Current Market Price is Rs.293.20; while the 52 week high price is Rs.325.65 and the 52 week low price  is Rs.241.75.

At this price and EPS, it is commanding a PE Ratio of 9.46.

The PE ratio is certainly not high – considering that ONGC is in a niche area and has huge scope for oil and gas exploration. Since it is in oil and Gas exploration – both of which are subject to Government controls – some uncertainty regarding pricing and recovery is bound to be there – till India becomes self – sufficient. 

This is a long way ahead, given the tardy rate of exploitation of the oil and Gas wells already discovered. Government will need to encourage the exploration and exploitation of oil and Gas reserves in on shore and the especially off-shore basins.

With India having a sea coast of over 5000 KMs, the prospects from each discovery can be high. If China could start exploration even in Indian Ocean – as some News reports indicated periodically – why not India too get into similar efforts – even away from its shores, within the international laws?

While such larger questions need detailed examination – the future of ONGC is clearly secure and bright – as it starts exploiting the oil and Gas reserves it has already discovered. 

For this, it will need to forge Joint ventures with the likes of BP (as Reliance has done) so that exploiting the reserves discovered can start FAST. Government may need to nudge ONGC to forge such alliances and joint ventures fast.

Public holding in the company currently stands at 25.86% or 2,212,527,428 no. of shares of Rs.5 FV each. To this, 427,774,504 shares will now get added presumably, from Govt pool.

As we can see from the announcements section, Govt of India is offering for Sale 427,774,504 shares (FV Rs.5) – at a floor price of Rs.290 Rupees - from March,1st.

Currently, ONGC shares are hovering around the floor price only. At this price, the downward risk seems to be very limited. Medium to long term investors will certainly gain from the purchase.

But, what can happen in the short term? This depends on Budget and RBI monetary Policy both.

If RBI reduces CRR / SLR significantly to boost liquidity and also reduces the HIGH INTEREST RATE REGIME, it will definitely boost Growth in many sectors - and boost market sentiment immediately for this reason. This benefits entire market - including ONGC. There is no rationale now - to continue the anti-growth regime of High Interest rates.

Second, Government can (and must) turn Budget into an instrument of  Growth. Social service / Subsidy sectors (like NREGS) must be controlled more drastically and made productive and economical. 

Revenues have always matched and overshot expectations of Government - when it went for Growth-oriented Policies. Therefore Budget deficit in 2012-13 can be brought down comfortably, if Budget is made an Engine of Growth. revenue expectations from 2012-13 need not depend on the depressed environment of 2011-12.

The anti-Growth Policies of 2011-12 , including that of Govt and RBI, have stifled growth, for the ostensible cause of containing Inflation - and in the process, added considerably to Budget deficit for current year - which itself is inflationary in character.

Now, both Govt and RBI are more concerned about Growth. 2012-13 can be an engine for Growth. If this happens, the short term prospects of ONGC share price also will improve considerably.


RESULTS TABLE


ONGC
31-Dec-11
30-Sep-11
%DIF1
30-Jun-11
%DIF2
31-Dec-10
%DIF3
Net Sales
1812384
2261632
-19.86
1619896
11.88
1858641
-2.49
Other Oprtng Income
39329
30904
27.26
20296
93.78
221774
-82.27
Increase in SIT/WIP
-2910
-2609
11.54
-7051
-58.73
4286
-167.9
Raw Materials
15219
16486
-7.69
14879
2.29
14111
7.85
Traded Goods
63
45
40
64
-1.56
323
-80.5
Employees Cost
33705
32758
2.89
30979
8.8
29134
15.69
Depreciation
453196
327817
38.25
412247
9.93
364098
24.47
Other Expenditure
700548
798993
-12.32
654326
7.06
679404
3.11
Total Expenditure
1199821
1173490
2.24
1105444
8.54
1091356
9.94
Profit from Operations
651892
1119046
-41.75
534748
21.91
989059
-34.09
Other Income
95817
113297
-15.43
72697
31.8
66926
43.17
Interest
186
653
-71.52
401
-53.62
544
-65.81
Exceptional Items
-314208
-

-

-

Profit before tax
1061731
1231690
-13.8
607044
74.9
1055441
0.6
Tax expense
387590
367467
5.48
197554
96.19
347118
11.66
Net Profit
674141
864223
-21.99
409490
64.63
708323
-4.83
Face Value (In Rs
5
5
0
5
0
10

Paid Up Equity
427776
427776
0
427776
0
213889
100
Basic EPS
7.88
10.1

4.79

33.12

Public holding (%)
25.86
25.86
0
25.86
0
25.86
0

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