ONGC VIDESH PRO­DUC­TION IN FY16 FLAT, EX­PLORER COULD RE­PORT LOSSES

Resource Digest - - CONTENT -

ONGC Videsh may have slipped into the red in FY16 due to the com­bined ef­fect of flat growth in its oil and gas out­put, low crude oil prices and im­pair­ment of as­sets. In the just con­cluded fis­cal year, OVL’S out­put stood at 8.914 mil­lion tonnes of oil equiv­a­lent (mtoe), hardly 1% more than the 8.874 mtoe it had pro­duced in the pre­vi­ous year, sources said. In FY15, the govern­ment-owned com­pany had re­ported a 6% rise in out­put against FY14.

Av­er­age crude price in AprilDe­cem­ber 2015 was $51 a bar­rel, which fell to $44 a bar­rel by March 31, 2016. This is against av­er­age an­nual crude oil price of $85 a bar­rel in FY15, $108 a bar­rel in FY14 and $110 a bar­rel in FY13.

In ad­di­tion, OVL is likely to have suf­fered im­pair­ment; the net worth of its as­sets has eroded with the fall in crude oil prices. A se­nior OVL of­fi­cial said the firm is work­ing on im­pair­ment losses as it is im­por­tant for ac­count­ing stan­dards. But the of­fi­cial did not di­vulge the ex­tent of im­pair­ment, say­ing the ex­er­cise is yet to be com­pleted.

“Due to a dras­tic fall in crude prices, OVL is likely to re­port im­pair­ment losses in FY16. This, along with flat out­put, could push the com­pany into losses,” said a Mum­bai-based an­a­lyst at Emkay Global Fi­nan­cial Ser­vices. With­out ac­count­ing for im­pair­ment losses, an­a­lysts ex­pect OVL to re­port a net profit of Rs 400 crore on rev­enues of Rs 12,000 crore in FY16.

OVL’S cu­mu­la­tive in­vest­ments, which are in the range of more than $26 bil­lion, could not help the ex­plorer to pro­por­tion­ately ramp up pro­duc­tion. It has achieved the high­est ever out­put in FY11 of 9.45 mtoe, which has since not been sur­passed.

A di­rec­tor on the board of OVL said that the com­pany would achieve dou­ble-digit pro­duc­tion growth in FY17 af­ter it gets its share from the re­cent $1.25-bil­lion ac­qui­si­tion of a 15% stake in the Vankor oil­fields in East Siberia. In ad­di­tion, pro­duc­tion from Im­pe­rial En­ergy is show­ing “signs of im­prove­ment”. OVL’S as­sets in coun­tries such as North and South Su­dan, and Syria are in dis­tress be­cause of geopo­lit­i­cal dis­tur­bances. Also, an­other pro­lific as­set in Venezuela is at the risk of fac­ing sim­i­lar hin­drances.

In 2009, OVL bought Im­pe­rial En­ergy for a whop­ping $2.1 bil­lion. The ac­qui­si­tion turned out to be the worst buy for OVL in re­cent times, where out­put has dras­ti­cally dropped to less than 9,000 bar­rels per day now against fore­cast of 80,000 bar­rels per day.

AV­ER­AGE CRUDE PRICE IN APRIL-DE­CEM­BER 2015 WAS $51 A BAR­REL, WHICH FELL TO $44 A BAR­REL BY MARCH 31, 2016. THIS IS AGAINST AV­ER­AGE AN­NUAL CRUDE OIL PRICE OF $85 A BAR­REL IN FY15, $108 A BAR­REL IN FY14 AND $110 A BAR­REL IN FY13

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