Plummeting oil prices in tandem with dwindling production lead to a decrease in ONGC's Q1FY26 earnings.
In a recent financial report, Oil and Natural Gas Corporation Limited (ONGC), the state-run oil and gas exploration and production company, has announced a 30% drop in profit after tax (PAT) for the first quarter of the financial year 2025-2026 (FY26).
The main factors contributing to the decline in ONGC's Q1 FY26 standalone net profit include a decrease in revenue from lower crude oil realizations, softer sales volumes, and reduced standalone revenue. Specifically, standalone net profit fell 10.2% year-on-year to ₹8,024 crore due to a 9.3% drop in standalone revenue and an 8.5% sequential fall in revenue to ₹32,003 crore, despite a slight rise in standalone crude oil production by 1.2%.
Revenue decline was a significant factor, with ONGC's consolidated revenue dropping about 3.2% year-on-year and standalone revenue declining 9.3% year-on-year and 9% quarter-on-quarter. This was impacted by weaker crude price realizations and reduced sales volumes.
A modest 1.2% increase in standalone crude oil production partly offset revenue declines, but natural gas output was marginally lower. Although standalone net profit dropped, the consolidated net profit showed an 18.2% year-on-year increase, reflecting other factors like premium pricing on gas from new wells and improved margins.
EBITDA slightly declined year-on-year for standalone operations but rose 23% quarter-on-quarter driven by margin improvement to 53.7%, indicating cost efficiency gains.
The consolidated total expenses of ONGC were lower in Q1FY26 at around ₹1.50 lakh crore compared to Q4FY25 and Q1FY25. However, the consolidated net profit of ONGC dropped by more than 18% in Q1 FY26 to approximately ₹11,554 crore.
In a positive note, ONGC declared two discoveries, both offshore, in its operated acreages during Q1FY26. The company also received a special dispensation from the Ministry of Oil and Natural Gas (MoPNG) to sell gas to Rajasthan Rajya Vidyut Utpadan Nigam (RRVUNL) at $6.5 per million British thermal units (mBtu) from RKOEA Jodhpur.
The Joint Venture of ONGC, Hardy Exploration & Production (India) and Invenire Petrodyne started production from the PY-3 Field, offshore in the Cauvery Basin, producing oil at the rate of 4,000 barrels per day (bopd) and gas at the rate of 88,000 standard cubic meters per day (SCMD).
Despite the decline in standalone net profit, it's clear that ONGC continues to make significant strides in exploration and production, with the discoveries in Q1FY26 being a testament to this. The company's strategic partnerships and operational efficiency improvements also bode well for future financial performance.
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