Stock review: ONGC

ONGC's December quarter performance was boosted by receipt of `1,898 crore from the gas pool account, as gross realisation from crude oil sales improved to $89.13 a barrel, an increase of 16.3 per cent year-on-year. However, rising oil prices led to a higher subsidy burden of `4,222 crore compared to `3,497 crore a year ago.

Nevertheless, net realisation at $64.8 a barrel was higher than $57.7 in the corresponding period a year ago and $62.8 a barrel in the September 2010 quarter. The top line grew a robust 34.2 per cent year-on-year and 12.9 per cent sequentially to

`20,804.15 crore. Improved realisation and gas pool receipts helped earnings before interest, tax, depreciation and amortisation grow 45 per cent year-onyear to `13,531.62 crore, while margin expanded 484 basis points to 65.04 per cent. Net profit surged over two fold to `7,083.23 crore compared to the corresponding quarter a year ago.

Going ahead, analysts expect rising output from marginal fields to more than offset any decline in production from the ageing ones. Its subsidiary, ONGC Videsh Limited, is also expected to report a jump in volumes by 2013 at around 12 million tonnes, as incremental production from Myanmar, Sakhalin-1 and Venezuela comes onstream, states a report from Angel Broking.

Analysts at Elara say the stock price factors in the delay in diesel deregulation as well as the higher under recoveries of `750 crore expected in 2011-12. Thus, any positive news flows now should help the stock rise. Moreover, the government plans to divest five per cent stake by March, with the management indicating that the process has already been initiated. Analysts say one should stay invested to reap rich dividends.

Improved realisation and higher receipts from the gas pool account boost overall performance