ONGC Q4 net falls 13 pct

State-run Oil and Natural Gas Corp. Ltd. (ONGC) said its fourth-quarter net profit fell 13 percent, lagging forecasts, due to higher mandatory discounts to refiners and one-off staff costs.

ONGC, India's second most valuable listed company with a market cap of $48 billion, also said it was in talks with oil majors Chevron, Total and Royal Dutch Shell to swap stakes in oil blocks and planned to spend $10.3 billion in acquiring and developing overseas assets by 2012.

ONGC exploration director D.K. Pande said the Indian explorer had 190 blocks and was offering stakes in four or five of them.

"We offer them stakes provided they compensate by reciprocating," Pande told reporters. "We will tie up with anybody that can add value to our properties."

ONGC said quarterly net profit fell to 26.82 billion rupees ($657 million) from 30.86 billion rupees a year ago. Eleven analysts had forecast a 35 percent rise to 41.6 billion rupees. Full-year net profit rose 8.4 percent to 156.43 billion rupees, lower than forecasts for more than 190 billion rupees.

"It (net profit) would have been better than last year but this year we have factored in 11 billion rupees as extraordinary expenses towards retirement and medical benefits for our employees," ONGC chairman, R.S. Sharma, told reporters.

ONGC shares ended 0.9 percent up at 916.60 rupees in a firm Mumbai market, with analysts saying that although it had missed forecasts, after the extraordinary expenses the quarterly profit was roughly in line with expectations.

The stock rose nearly 1 percent in the January-March period, lagging a 4 percent gain in the oil sector index.

SUBSIDY TO REFINERS

The company, which is second only to Reliance Industries in market capitalisation, produces nearly 80 percent of India's crude.

It is required by the government to sell oil and gas from its domestic output to state-run refiners at heavy discounts in order to keep retail fuel prices low.

ONGC said its subsidy to state-run refiners rose by 42.4 percent to 170.24 billion rupees for 2006/07. The company sold its crude at a discount of $22.11 per barrel to refiners in the full year to March 2007, up from $17 a barrel the previous year. It said it had earned an average $44.22 per barrel in 2006/07.

"It is becoming very difficult to judge ONGC because of the uncertainties surrounding its subsidy burden which has risen significantly over last few years," said Rohit Nagraj, analyst with Angel Stock Broking Ltd.

"We continue to remain neutral on the stock," he said.

For the year to end-March 2008, analysts expect net profit of about 205 billion rupees.

ONGC had been considering setting up a refinery in Rajasthan to process crude from a block belonging to Cairn India, the Indian arm of British explorer Cairn Energy Plc., but Sharma said it now had no plans to do so.

Cairn India needs a pipeline to transport its crude from its Rajasthan fields and Sharma said a decision on the pipeline would be taken by the government on Wednesday.

"It will be decided whether a pipeline will be laid by ONGC and Cairn, or a special purpose vehicle or a third party," he said.

ONGC Videsh, the company's overseas arm, plans to step up investment in acquisition and development of overseas assets to 420 billion rupees by 2012 from 255 billion in the previous five years.

"Our 11th five-year plan outlay is 420 billion rupees which we will spend on acquisitions and development of existing properties," ONGC Videsh Managing Director R.S. Butola said.

ONGC is eyeing a 51 percent stake in a producing oil field in Azerbaijan. Butola said the company was hopeful it would get some assets there and was talking to Azerbaijan's state-run oil company Socar.

To secure more oil assets, the company is pursuing opportunities in Africa, the Middle East, Russia, Latin America and Kazakhstan.

Via Reuters