Market unlikely to treat ONGC's Q3 results as a negative surprise

MUMBAI: ONGC posted lowest profits in last five quarters for the December 2012 quarter lower production, while the subsidy burden remained high. The profit at Rs 5563 crore was 17% lower y-o-y, but in line with the street expectations.

The market is unlikely to treat the results as a negative surprise as ONGC's profits last year were bloated by extra-ordinary income. The company had booked Rs 3142 crore income in Dec '11 quarter as Cairn India accepted the royalty payment as cost recoverable for Rajasthan field.

ONGC shared Rs 12,433 crore as subsidy during the Dec'12 quarter, which was only marginally lower to year ago quarter. The company's subsidy burden has remained above Rs 12,000 crore level for seven out of past eight quarters, as it contributed over Rs 93,000 crore in last two years.

ONGC's future appears brighter thanks mainly to the government's steps to gradually raise diesel prices that would substantially reduce petroleum subsidies in coming months.

Similarly, the government is deliberating on hiking prices of domestically produced natural gas, which could result in a substantial jump in ONGC's profits. Besides, its oil production is expected to witness a jump of nearly 2 million tonne during FY14, according to the company's plans.