ONGC slips up to 4% after reporting a first-ever loss in March quarter

Jannie Delucca

Shares of Oil and Organic Fuel Corporation (ONGC) slipped as a great deal as 3.93 for every cent to Rs seventy eight.twenty apiece on the BSE on Wednesday, a working day soon after the point out-run oil and gas company posted a pre-tax loss of Rs 10,529 crore in the fourth quarter of the economic calendar year 2019-twenty (Q4FY20). The loss was thanks to a fall in crude oil charges, the effect of the Covid-19-induced lockdown, and exchange losses. It was ONGC’s initially-ever quarterly loss.

At 09:29 am, the inventory was trading one.six for every cent lower at Rs eighty.10 on the BSE. In comparison, the S&P BSE Sensex was quoting .5 for every cent higher at 35,099 amounts.

ONGC experienced logged a earnings in advance of tax (PBT) of Rs 11,691 crore in the corresponding period of time of FY19. The company’s earnings from functions declined by seven for every cent to Rs 104,489 crore in the period of time below evaluate, when compared to Rs 112,539 crore the prior calendar year. Click on In this article TO Read through Comprehensive REPORT

For the duration of the quarter below evaluate, the company’s web realisation on crude was found $49.01 a barrel, as from $61.93 a barrel a calendar year ago. Fuel selling price for the quarter was also lower at $3.23 for every million metric British thermal unit (mmBtu), when compared to $3.36 a mmBtu in the calendar year-ago period of time.

Analysts at Motilal Oswal Fiscal Companies (MOFSL), in an earnings evaluate report, observe that global lockdowns on account of Covid-19 led to massive desire destruction, which saw crude oil charges sink to historic lows. With the lifting of the lockdowns across the globe, desire is yet again observing an uptick. On the offer facet, output cuts, both equally intentional (OPEC++) and accidental (thanks to poor economies/bankruptcies) show up to be placing upward pressure on oil charges, they wrote.

“ONGC is predicted to expand its gas output by nearly 12 for every cent / 26 for every cent to 27.9bcm/35.2bcm in FY21/FY22E. Whilst no oil output development is predicted, ONGC’s endeavours to arrest drop from age-previous fields (accounting for 60–70 for every cent of the complete oil output) is commendable,” the brokerage said. It has maintained a “Get” ranking on the inventory with the focus on selling price of Rs 105.

“With oil out of the woods, we revert to discounted dollars flow DCF-dependent good value of ONGC’s oil & gas reserves from 10x FY21E earnings for every share (EPS) before. Our DCF-dependent valuation, assuming Brent at US$40/bbl in FY21E, US$45/bbl in FY22E

and very long-phrase Brent at US$fifty/bbl, will work out to Rs124/share (52% upside),” says ICICI Securities.

It more says that below the prevailing gas pricing formulation (connected to gas charges in 4 nations around the world of which a few are web exporters), gas charges would be nearly US$2.2/mmbtu in FY21E. Deregulation of gas charges could make improvements to trader sentiment in ONGC and strengthen its gas charges gradually to US$4/mmbtu or higher. The latest start off of the gas trading exchange and the oil minister’s responses at the start of the exchange is also predicted to aid the company.

Besides, a rise in oil charges would also be a share selling price driver, it says in its ranking rationale. The brokerage has upgraded the inventory to ‘Buy’ from ‘Hold’ with the focus on selling price of Rs 124.

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