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Expect financial performance of FY18 to be better than previous year: ONGC

In an interview to CNBC-TV18, AK Srinivasan, Director-Finance at Oil and Natural Gas Corporation (ONGC) shared his FY18 outlook.

September 04, 2017 / 05:02 PM IST

In an interview to CNBC-TV18, AK Srinivasan, Director-Finance at Oil and Natural Gas Corporation (ONGC) shared his FY18 outlook.

We are seeing stable production in the crude oil space and gas. We are going to do better from the previous year, he said.

This will increase company’s revenue space, also gas prices will be higher from October 1 than current prices, he added.

For every dollar increase in gas price, revenue gets impacted by Rs 4,000 crore and for every dollar increase in crude oil, revenue gets impacted by Rs 900 crore, said Srinivasan.

On Hindustan Petroleum Corporation Ltd (HPCL) issue he said, HPCL will be a separate listed entity, will not merge with ONGC.

Below is the verbatim transcript of the interview:

Anuj: What is happening in your space right now? Are you going through a bit of a goldilocks scenario? You do not have to compensate for under recoveries and at the same time oil is also inching up a bit. Are realisations now looking better than ever?

A: Definitely and also from the perspective of our growth we are seeing stable production in the crude oil space and gas. We are going to do better from the previous years. This will increase our revenue space and also gas prices will be higher from October 1 than current prices. So definitely revenues are going to be slightly better than what it was last year.

Latha: You would have done your own math; after all you know the formula. Where is the gas price likely to settle for the next six months when it is announced at the end of the month and what will it do to your margins, any ballpark arithmetic?

A: Roughly gas prices should be in and around USD 3 and for every dollar impact on our total year revenue is about Rs 4,000 crore. So if you look for half year, Rs 1,000 crore should be in and around on my volumes.

Reema: Crude prices have inched up a tad bit. What would all this mean for the net realisations of the company in the quarter that we are currently in?

A: For every dollar increase in crude oil, my topline goes up by around Rs 900 crore. If you look at it on quarter basis, it should be half the volumes and for 1/4th of the volume it should be about Rs 250 crore going up for every dollar.

Reema: USD 51 per bbl was the net realisation in Q1. Considering we are 2/3rd of the quarter through, what is your expectation of what the net realisations could be in Q2?

A: If it is more than the previous price averages and even if it is going up by USD 2, as I said for every dollar increase it gives me about Rs 250 crore, so to that extent my revenues increase across.

Latha: We heard from the ONGC top management, source based, that you all are not going to merger HPCL into your company and therefore the question of an open offer doesn't arise. Is that the final word, anything that you can update us on the HPCL issue?

A: In principle the company has taken the approval process through board that we will be acquiring 51 percent share and definitely it will be kept as a separate company. It is not going to merge with ONGC. It will be a standalone company.

Latha: How will you fund USD 5 billion acquisition?

A: There are various options and we are examining all the pros and cons of the transaction and based on the appropriate situation and what is cost benefit to the company, those will be taken up as a process.

Latha: Any sale of your shares in Indian Oil Corporation (IOC) or Mangalore Refinery and Petrochemicals Limited (MRPL) is on the table?

A: Not as on date. However, as we go along we will have to evaluate all the multiple options which are in front of the company and as the due diligence process is continued and carried out, based on which an appropriate decision will be taken.

Latha: If it is either or - IOC or MRPL, what would you prefer to sell?

A: It is too premature from my point to view to make a comment because it is a decision of a board, a committee which need to take a view about it.

Reema: What is your guidance on gas production for FY18 or this fiscal year?

A: If you look at crude oil, it is going to be about 25.93 in the current year in total and for gas it should be 25.34.

Latha: These other companies that are on the block because of their default status. One of them is Videocon and it has some oil assets. They should be available at distressed valuation to you. Is ONGC an interested buyer?

A: Basically a buyer and a seller have to settle down with the prices and the evaluations are, if any opportunity is there, they will be commercially evaluated. If the deal looks attractive, the company may make a decision but a process of diligence or if a block is available, we will definitely look and evaluate it. Right now we will not be making decision whether we are buying or not buying.

Latha: But you will look or have looked?

A: No, we have not looked at anything.

first published: Sep 4, 2017 02:09 pm

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