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Oil & Natural Gas Corpn Ltd

| Q4 FY25 Earnings Conference call

NEUTRAL SENTIMENT

Report Source

⬤22nd May 25

Summary : ONGC reported a PAT decline due to exploration write-offs but projects future growth from new gas fields, cost controls, and green energy expansion.

Management Perspective positive : "very confident that we will have our growth story intact""hope to remain positive for years to come""very proud to report that cost side we have done very well""ONGC has become formidable in no time [in renewable energy space]"

Concall Report Analysis & Insights

Business Overview

  1. PAT decreased 12.1% to INR 35,610 crores in FY25, mainly due to exploration write-offs.
  2. Sales revenue remained flat at INR 137,361 crores, impacted by lower crude oil realization.
  3. Operating expenditure increased marginally by 2.8% to INR 27,478 crores.
  4. Crude oil production increased 0.9% to 18.558 MMT, while natural gas production slightly declined.
  5. Declared 9 discoveries, monetized 8, and achieved a reserve replacement ratio of 1.35.
  6. Drilled 578 wells, the highest in 35 years, including 109 exploratory wells.

Future Growth Prospects

  1. KG 98/2 gas production is expected to reach 10 mmscmd, with oil production targeting 45,000 bopd.
  2. Western Offshore projects (DUDP, DSF) to add 5 mmscmd gas by Q4 FY26.
  3. OPaL is expected to perform very well, benefiting from SEZ exit and new gas pricing.
  4. Mozambique LNG project is anticipated to deliver gas within the next three years.
  5. Green energy capacity targets 10 GW by 2030, currently at 2.5 GW.
  6. Strategic investments in offshore vessel fleet are planned for profitability.

Management Insights

  1. PAT decline is primarily due to increased exploratory well write-offs, considered an investment for future finds.
  2. Confident in sustained production growth through well interventions and new drilling initiatives.
  3. OPaL's performance is expected to improve significantly after exiting SEZ and securing new gas prices.
  4. ONGC is the highest profit-making CPSE (excluding banking sector) in India.
  5. Aggressive cost control measures are being implemented, including optimizing rig rates and logistics.
  6. Committed to green energy transition, aiming for 10 GW renewable capacity by 2030.

Risk Factors

  1. Increased exploration cost write-offs impacted current year's PAT.
  2. Production decline in matured and marginal fields requires continuous intervention.
  3. Geopolitical issues and sanctions affect OVL's Sakhalin 1 and Syria assets.
  4. Consolidated PAT decreased significantly due to lower profits from subsidiaries HPCL, MRPL, and OPaL.

Good To Know

  1. ONGC invested INR 62,000 crores in CapEx in FY25, with INR 10,300 crores for exploration.
  2. The Board recommended a total dividend payout of 245% for FY25, the highest quantum ever.
  3. OPaL's ownership by ONGC is now over 95%, with expected annual boost of INR 700-800 crores from SEZ exit.
  4. New well gas prices are significantly better than APM prices, adding substantial revenue.
  5. Cost control efforts include opening a new port at Pipavav to reduce logistics costs for Western Offshore operations.
  6. ONGC Videsh (OVL) production increased by 9% last year, with ongoing business development opportunities.

Key Drivers

  1. KG 98/2 gas production ramp-up.
  2. New well gas prices are remunerative.
  3. OPaL turnaround, SEZ exit benefits.
  4. Green energy capacity expansion.

Key Analyst Discussions

Financial Highlights

  1. Analysts questioned the restatement of JV volumes for FY24 and the decline in FY25.
  2. Clarification was sought on the reinstatement of OVL's crude oil revenue.

Product Composition

  1. Questions on OPaL's current input mix (60% naphtha, 40% ethane) and future shift to US gas.
  2. Inquiries about the exact volumes of naphtha and gas consumed by OPaL.

Strategic Considerations

  1. Questions on KG 98/2 gas production timeline and target of 10 mmscmd.
  2. Inquiries about CapEx guidance for FY26 (INR 30,000-35,000 crores) and new business investments like LNG and shipping.
  3. Discussion on policy scenario, global technology tie-ups, and partnerships for challenging fields (Cluster 3).
  4. Clarification on the fluctuation of dry well write-offs and their nature as investment.