ongc q3 2013 earnings call 11 febâ€™13

ONGC Q3 2013 Earnings Call 11 Feb’13

Operator Good evening, ladies and gentlemen. Thank you for standing by and welcome to the Conference Call of Third Quarter Financial Year 2013 Earnings. For the duration of presentation, all participants' lines will be in a listen‐only mode. We will have a Q&A session after the presentation. I would like to now hand over the conference to Mr. A. K. Srinivasan. Over to you, Mr. Srinivasan.

A. K. Srinivasan, GM‐Chief Corporate Finance Good evening. This is Srinivasan here. Ladies and gentlemen, I'm A.K. Srinivasan, Chief Corporate Finance on ONGC and on behalf of ONGC, I welcome you all in this ONGC earning call for Q3 FY' 12‐13. Thank you for all joining us on the call. I'm joined by my colleague Mr. S.Ranganathan, Mr. Sanjeev Kumar and the team there of OVL led by Mr. K.S. Pandey [ph].

The financial results for the third quarter and nine months ended 31st December 2012 have been taken on record by ONGC Board today, that is 11th February 2013. The results have been released through a press note and sent to the stock exchanges. This has also been sent to the analysts who are there on our mailing list. Let me give a synopsis of the results. The company has earned a net profit, that is Profit After Tax of INR5,563 crore in the third quarter of FY'13 as against INR6,741 crore during third quarter of FY'12, a decrease of INR1,178 crore that is 17.12%. (audio gap) INR1,942 crore that is 10%. The decrease in PAT mainly attributed to an exceptional income of INR3,142 crore received in Q3 FY'12 of (inaudible) Scale India Limited toward royalty paid in respect of RJONN‐90/1 Block for the period from August 2009 to September 2011. Pursuant to finalization of agreement between ONGC, Scale Energy Plc and (inaudible) keeping royalty paid as contracts, cost eligible for cost recovery. Further the decrease in PAT is due to increase in statutory levies INR1,868 crore, DD&A cost INR139 crore mainly due to depletion, provision and write‐off INR500 crore. Government of India share of profit petroleum INR257 crore, operating expenses INR23 crore, survey expenditures charged off INR26 crore and decrease in the interest and dividend income INR99 crore.

However this decrease was partly off‐set by increase in Crude, Gas and VAP sales realization by INR2,000 crore, INR400 crore and INR747 crore respectively. Further this decrease in PAT was off‐set by an increase in non‐operating income INR127 crore, decrease in tax burden INR1,228 crore, dry well cost written off INR286 crore. Loss due to Exchange fluctuation INR135 crore.

Similarly the decrease of PAT in nine months FY'13 is mainly due to the receipt of the exceptional income of INR3,142 crore as I doubt earlier.

Further the decrease in PAT is also attributable to increase its statutory level INR4326 crore, DDA cost INR168 crore, mainly due to depletion, again provision and write offs INR1080 crore, Government of India share of profit petroleum INR537 crore, operating expense is INR289 crores.

Overall this decrease of PAT in nine month FY' 13 was also partially offset by increasing crude, gas and large scale realization by INR848 crore, INR2133 crore and INR1492 crore respectively. Further this decrease in PAT was offset by an increase in non‐operating income INR743 crore, interest and dividend income INR26 crore and other operating income INR25 crore.

Decrease in tax burden, INR1372 crores, loss due to exchange fluctuation INR373 crore, dry well cost written off, INR1718 [ph] crore and survey expenditure charged off INR46 crore. Our share of subsidies towards under recoveries or oil marketing companies during Q3 FY '13 stood at INR12,433 crore as against INR12,536 crore in Q3 FY '12. The same for the nine‐months of the current fiscal stood at INR37,108 crore as against INR30,296 crore for the nine‐month of FY '12.

The gross sales and revenue for Q3 of FY '13 is higher by INR2,890 crore, an increase of 15.9% at INR21,089 crore as against INR18,199 crore in the corresponding quarter of previous year mainly due to positive price and quantity variance of crude amounting to INR2000 crore, positive price variance of both gas, INR435 crore and value added product INR826 crore.

Negative quantity variance arise of gas INR25 crore and value added products INR79 crore and impacted by an increase in the Government of India share of profit petroleum surrendered by INR257 crore.

Again the gross sales revenue for nine months FY' 13 is higher by INR3,936 crore, an increase of 6.9% at INR61,090 [ph] crore as

against INR57,154 crore in the corresponding nine months of previous year mainly due to positive quantity variance of crude INR3435 crore, positive price and positive variance of gas, INR2133 crore and positive price variance of INR1521 crore offset by a negative price variance of crude INR2587 crore and negative quantity variance of that amounting to INR29 crore finally impacted by the increase in the Government of India profit petroleum by INR537 crore.

The gross billing for crude oil during the third quarter of the current fiscal was at $110.16 per barrel as against USD 111.48 per barrel in the same period of last year, that is a decrease of 1.2%. However, after allowing discounts by way of our contribution towards under recoveries to the downstream marketing companies, the net realization of crude oil in this quarter was $47.97 per barrel, as against $44.71 per barrel in the same period of last year, which amounted to an increase of 7.3%.

Similarly, the gross billing for the nine months of this year stood at $109.72 barrel as compared to $116.01 per barrel for the nine months of the last fiscal. The net realization after discount for the nine months of the current year was $46.90 per barrel vis‐a‐vis $58.38 per barrel in the nine month of last year. During the third quarter of FY '13, the exchange rate of rupee versus dollar stood at INR54.14 in Q3 FY '13 vis‐a‐vis INR51.01 in the third quarter of FY '12, which has resulted in a favorable impact on the sale revenue by INR1254 crore as the (inaudible) rise of this product are denominated in USD and leading to international brand further the weakening of rupee by rupees 7.39 per dollar, during the nine months FY'13 resulted in a favorable impact. On the sales revenue by INR9,808 crore during nine month FY'13.

Despite a decrease in rupee post realization rate from rupees 2,753 per barrel, in nine months FY'12 for rupees 2,558 in months FY'13. Non‐operating income in Q3FY'13 has increased by INR127 crore as compared to Q3FY'12 that is from INR307 crore in Q3FY'12 to INR434 crore in Q3FY'13.

The increase in mainly attributable to write back of excess provision of INR206 crore in Q3FY'13 on account of settlement of dispute that ‐‐ dispute between (inaudible)This increase was offset by decrease in miscellaneous repeat due to accountive [ph] of an income of INR95 crore in Q3FY'12 towards an arbitration award in favor of ONGC in the case between FCI [ph] and ONGC.

Similarly during nine month FY'13 non‐operating income has increased by INR743 crore that is from INR669 crore in nine month FY'12 to INR121 crore in nine months FY'13. The increase in mainly due to the write back of excess provision of INR628 crore in nine months FY'13 on the account and the recent stated accounts.

And increase in write back of excess liabilities on account of, royalties on closing stock at western region that is INR200 crore partially offset by decrease in respect of reversal of excess liability according into the rig higher amount charges amounting to INR60 crore.

Interest and dividend income has decreased by INR99 crore that is from INR946 crore in Q3FY'12 to INR847 crore Q3FY'13. The decrease is mainly due to marginal decrease in average of interest, on investable funds from 9.94% per annum in Q3FY'12, 9.19% per annum in Q3FY'13 and also due to marginal reduction in investable capital fund.

However during nine month FY'13 interest and dividend income has increased by INR26 crore, that is from INR2,783 crore in nine month FY '12 to INR2809 crore in FY '13, a nine month FY '13. The operating expenditure of Q3 FY '13 has increased marginally by INR23 crore to INR3,332 crore from INR3,309 crore, and during nine month FY '13, the operating expenditure has increased by INR289 crore to INR10,157 crore from 9,868 crore mainly on account of increase in manpower, pollution control, repair and maintenance, contractual payment including higher charges, administrative expenses, transportation of oil and gas, unallocable rig cost and R&D expenditure.

This increase both in third quarter FY '13 and nine month FY '13 is partly offset by decrease in work‐over operation expenses, water injection, purchase of condensate, transport expenses, other production expenditure, et cetera. DD&A cost for Q3 FY '13, stood at INR2,341 crore as against INR2,202 crore in Q3 FY '12, that is an increase of INR139 crore, 6.3%.

The increase is mainly on account of depletion at Western Offshore due to capitalization of MHN project and increase in depreciation due to capitalization of asset relating to transportation of oil and gas in MNC process, that one during Q3 FY'13. Similarly there is an increase of INR168 crore, on account of DD&A cost in nine month FY '13 that is from INR5,820 crore in nine month FY '12 to INR5,988 crore. The increase is mainly on account of higher depletion at Western Offshore due to capitalization of facility and depletion of B22 and North Tapti. This is partly offset by decrease in depletion and depreciation due to increased proved reserves and charging of 100% depreciation on flow lines capitalized during nine month FY '12, respectively in Rajasthan block RJ‐ON‐90/1.

The exploration cost written off as decreased in Q3 FY '13 to INR2,070 crore as compared to INR2,330 crore in Q3 FY '12. A decrease also INR260 crore mainly on of account lower dry well cost written off by INR286 crore from INR2,051 crore to INR1,765 crore in Q3FY'13. However, the survey expenses has increased by INR26 crore in Q3FY'13 from INR279 crore to INR305 crore, mainly due to higher 3D Survey activity offset by lower 2D survey The exploration cost written off and also decreased during nine months FY'13 by INR764 crore. That is from INR6,113 crore to INR5,349 crore. Mainly due to lower dry well cost written off by INR718 crore and decreased in survey expenditure due to lower 3D and 2D survey activities in nine month FY'13. Provisions and write‐off has

increased by INR504 crore, that is from INR60 crore in Q3FY'12 to INR564 crore in Q3FY'13.

The provision includes an amount of INR389 crore towards VAT/Octroi/CST deduction by refineries on discount on crude oil from ONGC.

In addition, it also includes the write‐off amount receivable from gains as bank debt amounting to INR110 crore. On account of settlement of disputed written. Similarly provisions are write‐off has increase by INR1,080 crore in nine months FY'13 from INR317 crore in nine months FY'12 to INR1,397 crore in nine months FY'13. The provision again includes an amount of INR1,127 crore towards VAT/Octroi/CST deduction by refineries on discount on crude oil from ONGC and write‐off amount receivable from gain, which is partially offset by adjustment of provisions of INR175 crore. Made in nine months FY'12 towards short payment made by IOC based on the draft crude oil sale agreement COSA.

During Q3FY'13 the statutory levies stood at INR5,813 crore as compared to INR3,945 crore in Q3FY'12. That is an increase of INR1,868 crore and percentage wise 47.4%. Similarly, during nine months of FY'13. The statutory levies has increased by INR4,326 crore that is 34.4% down INR12,469 crore in nine FY'12 to INR6,795 crore in nine month FY'13. One of the main reasons while increase in statutory levies is that which has increase by INR1,169 crore in Q3FY'13 and INR3,291 crore in nine month FY'13 mainly due to revision of rate of Cess from INR2,500 per MT to INR4,500 per MT effective from 17th of March 2012.

The increase in statutory levies is on across on royalty by INR618 crore in Q3FY'13 and INR931 crore in nine month FY'13 is attributable to non‐operating RJONN‐90/1 Block, so the company experience royalty at 100% but there is 70% CI.

Increase royalty obligation in the block due to increase production that point 51mmp in nine months FY'13 beside an increase of average sales realization in nominated block.

Well, friends, with this, I finish my briefing on the third quarter results for fiscal 2012‐13. And will be happy to take questions from you. Please try to confine your questions on the quarterly results only. I and my team member will try to answer your questions. Thank you.

Questions And Answers

Operator Thank you, Mr. Srinivasan. (Operator Instruction). The first question of the day is from Amit Rustagi of Antique. Mr. Rustagi, your line is unmuted now, you can go ahead and ask.

Amit Rastogi, Analyst Sir, can you guide us with respect to the additional production of gas, which is going to come from non‐APM fields. We have been talking of 6 mmscmd production, but I'm not sure when it's going to added and whether it is already come into the numbers and all?

A. K. Srinivasan, GM‐Chief Corporate Finance Amit Rastogi, Analyst Okay.

A. K. Srinivasan, GM‐Chief Corporate Finance Rest of the fields ‐‐

Amit Rastogi, Analyst June 13.

A. K. Srinivasan, GM‐Chief Corporate Finance Sorry, June 13.

Amit Rastogi, Analyst Yeah.

A. K. Srinivasan, GM‐Chief Corporate Finance Rest of the fields are in the West Coast and they are being developed through cluster systems and most of these fields, they will be on these fields starting from this year and by 2014, 2015, most of them will be on this field.

Amit Rastogi, Analyst Okay.

A. K. Srinivasan, GM‐Chief Corporate Finance These fields will add the production. Even addition, actually, you may ‐‐ might have heard that our OTPC, that is ONGC Tripura Power Corporation Limited, the first unit is on production and it is generating electricity and due to this ‐‐ about 1 mmscmd of gas production has increased from Tripura. So when both the units are synchronized and are commissioned, then we see a upside of around 3 mmscmd from Tripura gas production.


A. K. Srinivasan, GM‐Chief Corporate Finance Amit Rastogi, Analyst Sir, can you just give me more color on this Daman project that which field is this, how much is the CapEx and when you say 15, 16 it is like FY '16 we are referring to?

Unidentified Speaker Yeah, actually the fields are ‐‐ we have attributed the Q3 results along with the B12 and C24/12 the original Daman project and actually we (inaudible) some 3.5 mmscmd and integrating all fields, all means Daman and C3, the production is going to shoot up from 3 to 13 mmscmd and most likely it will be on stream from 2014‐2015 onwards.

Amit Rastogi, Analyst Sir, 2014‐2015 onwards. Sir, it is like 2014 calendar year or 2015 calendar year?

Unidentified Speaker No, mostly 2015 calendar year only because there are some issues with evacuation of gas from Daman and that one settled ‐‐ initially the production has come from Q3 (inaudible) made for Daman.

Amit Rastogi, Analyst Okay, so basically Daman and the C‐Series will come together?

Unidentified Speaker Yeah.

Amit Rastogi, Analyst Sir, when we say the 6 mmscmd growth, so 3 mmscmd is coming from Tripura, right? And rest 3 mmscmd we are talking across that ‐‐?

Unidentified Speaker No, actually Tripura we are looking up at 0.5 mmscmd once this 726 megawatt full units of possibility comes on sync ‐‐ synchronized. So total it should go up to 5 mmscmd from Tripura alone.

Amit Rastogi, Analyst Sir, but when we look at our FY14 target, in terms of MoU, we have given a target of 24.61 Bcf, right? Is that correct number?


Amit Rastogi, Analyst 24.61, because this 23.75. Sir, this is just a 2.7 mmscmd increase in production.


Amit Rastogi, Analyst So sir, how we can be so conservative in terms of target?

Unidentified Speaker No, I mean if we generate that production from Tripura, it's going to go up to (inaudible) it's not in the next year or so. It will take two or three years more some time to synchronize, I mean to come up.

Amit Rastogi, Analyst So, whether if I keep aside Tripura, those 6 mmscmd we are talking from rest of the case like G1, GH15 and west coast field. But in our MoU target, we are just 2.7 mmcmd?

Unidentified Speaker Yes, when that ‐‐ even C‐series and Daman is not going to come in '13, '14. There will be only in the ‐‐ for specific calendar year as of '15 only, after that. Okay, ‐‐ '12, '13 only this one GH15 is supposed to come and G1 this field already on the production G1 is going to come later this year.

Amit Rastogi, Analyst Sir, but we are hearing lot of noise with respect to your 6 mmscmd gas production from non APM fields. There even power companies are demanding that it should be allocated to them. So I don't know how the 6 mmscmd number is coming from in next one year or two years?

Unidentified Speaker

No, actually, initially we had planned for C‐Series and Bandra formation gases, that was in last year when we said these three months renewals is going come from Bandra formation and C‐Series. But then, now we are planning to integrate C‐Series with Daman and we have a problem of uptake for C‐Series also from a private consumer. So we are going beyond one new firm which is ‐‐ right now, now we are focusing one month from C‐Series. Okay, okay that's all from my side. Thanks a lot.

Operator Thank you, Mr. Rustagi. The next question of the day is from Mr. Harshad Borawake of Motilal Oswal. Mr. Borawake your line is unmuted now.

Harshad Borawake, Analyst Hi, sir I have one question on this gas price, likely as price hike of APM in case it will go to $8 per mmbtu. Have you done any internal assessment in terms of reserve increase at this price. And also you know how much production could increase because actually our gas production or developments of plants or production program does not depend much, very much on the price. It's not ‐‐ I mean, we are not ‐‐ we have taken up a liberty, we'd normally take (inaudible) like for oil we take $55 to $60 and gas as current what we are getting.

Unidentified Participant Sure.

Unidentified Speaker But it's sure that we'd rise up, (inaudible) is the grade that is most of our ‐‐ for that like as we would, gas fills will be more economical, become more viable. Because, most ‐‐ many of them are lying idle, because lack of consumer and lack of availability.

Unidentified Participant Sure. Any ball park numbers in term of production increase, if it were to go $10?

Unidentified Speaker Right now, we cannot come up with because even if we increase the $8 dollars we need to create facilities, so how much will come and when it will come we can't be sure on that count.

Unidentified Participant Okay, fine. The other question is on the ‐‐ what are the nine month total CapEx and also the travel expenditure instead of 1,765 in this quarter. So what are they key status or key wells, which this can be attributed to?

Unidentified Speaker Really nine months dry wells, which are mainly attributable to its all regions, it is note, last farming at Western Offshore, KG Offshore. So there is ‐‐ it is currently [ph] combined, it's not a very specific thing. It's a (inaudible) thanks.

Unidentified Speaker Yeah, majority are in (inaudible).

Unidentified Participant

And also, is it majority of deep water block?

Unidentified Speaker No, it is more on shallow.

Unidentified Participant Shallow water.

Unidentified Speaker Deep water, once again here in the last year itself.

Unidentified Speaker It is also there.

Unidentified Speaker Yeah, not middle. Only three, four wells are there in , which have been at our major list of that.

Unidentified Participant Okay. Okay. And so what are the nine months CapEx number?

Unidentified Speaker Nine months CapEx utilization was ‐‐ now up to the current month that is December, we are about 23,000 crores.

Unidentified Participant 23,000, okay That is up to end of January.

Unidentified Participant Okay, end of January? Okay in the last week any guys update on this Azerbaijan and Kazakhstan acquisition?

Unidentified Speaker Yeah, my colleagues want more, ‐‐ we will do it because of that and for today, inside our ‐‐ what is this ‐‐ get question about this.

Harshad Borawake, Analyst Just wanted the status of observation as well as Kashagan, because in terms of Kashagan, we had different news flows from media?

Unidentified Speaker So just maybe the media is replacement, right now we are mainly focusing on the Kashagan and we are seeing the processes and by the mid‐March it will be finished.

Harshad Borawake, Analyst Okay. So last time you mention that the date is likes Jan 2012 and if the production went, they accounted in this year itself, so March is possible?

Unidentified Speaker Yeah, once it is finished before March then it will be competate and if it is not finished in this fiscal then it will be not competate at all.

Harshad Borawake, Analyst Okay, but we expected by mid‐March it could finish, right?

Unidentified Speaker Yes, we are expecting.

Harshad Borawake, Analyst Okay. Okay, fine. Thank you. That's it. Thank you Mr. Borawake. The next question of the day is Mayur from Spark Capital. Mayur, your lines are muted, now you can go ahead and ask.

Mayur Patel, Analyst Thank you, sir for taking my questions. First of all, can you just ‐‐ what is your guidance on ‐‐ for FY '14 and '15?

Unidentified Speaker FY 14 it is 25.78 for ‐‐ when you see and then joint ventures will be 3.31.

Mayur Patel, Analyst This is oil?

Unidentified Speaker This is oil. And for gas it is 22.61 and JV it will be 1.8 crores.

Mayur Patel, Analyst And '15.

Unidentified Speaker 15 is actually when we had made the 12 plants that time we had. Still we had not found the plant, FY '15, till FY '14 we can give, but we hope that beyond FY '15 we are going to go up from ‐‐ above 25 million tons of oil production.

Mayur Patel, Analyst Above 25?

Unidentified Speaker Yeah, we will be above that.

Mayur Patel, Analyst And sir, this FY '14 growth would come up from which specific fields like we have all this marginal fields under development and?

Unidentified Speaker Mayur Patel, Analyst Yeah.

A. K. Srinivasan, GM‐Chief Corporate Finance But the marginal tweaks of Western Offshore, they are going to continue towards the implemented production, crude oil production.

Mayur Patel, Analyst Okay. And how is the D1 development going on, is it on track?

A. K. Srinivasan, GM‐Chief Corporate Finance D1 development is on fast track, it is simply the well which produced, which was greater, that was on work‐over and after that they are going to commence the more drilling, and required infrastructure is already in place, because we are already producing from D1 field, it will be able to handle the speed of the volumes around 60,000 barrels per day. So we hope by January 14, some production will come from the additional production.

Mayur Patel, Analyst How much additional production you expect by January '14?

Unidentified Speaker Actually that assessment is still going on, but the volume continues to become sales at least. But we haven't planned. Right now, we have a weight which is ‐‐ we have our first facility which connects to up to 6,000, but in case the production goes beyond 6,000, we are looking up sort of FDSO, which is also shortly coming near that D1 for storage and production.

Unidentified Speaker We'd have a potential of around ‐‐ the additional incremental potential is of around 1 million tonne.

Mayur Patel, Analyst One million. Sir, last question. What is the status in Sudan, when is the production likely to start?

Unidentified Speaker In fact, it means going to take two and half months and more, that means in the next fiscal year. Two and a half quarters. Thanks a lot. I'll come back.

Operator Thank you, sir. The next question of the day is from Neeraj Man Singh from Edelweiss. Mr. Man Singh, your line is admitted now, you can go ahead and ask your question.

Neeraj Man Singh, Analyst Two questions, first on modeling perspective. What was the production from Rajasthan that you have booked?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah, we have booked around 1,75,000 barrels weight only.

Neeraj Man Singh, Analyst And in million tones would be how much?

A. K. Srinivasan, GM‐Chief Corporate Finance Will give you the number. It's around 1.9 MMT.

A. K. Srinivasan, GM‐Chief Corporate Finance 1.9 MMT for ONGC share.

Neeraj Man Singh, Analyst And the royalty that you might have ‐‐ (inaudible) to royalty and Rajasthan revenues, I was just wondering those numbers as well, for the three quarters it's around 3,708 crore.

Niraj Mansingka, Analyst 3708. And this is the ‐‐ and you have also booked revenue in this quarter this number as well, right?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah. Exactly. And based on the EI ‐‐, the revenue has come to around 2.64 for the nine months.

Niraj Mansingka, Analyst Sorry?

A. K. Srinivasan, GM‐Chief Corporate Finance 2.64 MMT for the nine months.

Niraj Mansingka, Analyst 2.6 MMT for nine months?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah.

Niraj Mansingka, Analyst And the revenues for the Rajasthan side that you've booked, based on EI?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah. Actual production is 1.9 and based on the EI it is 2.6. The revenue is booked based on ‐‐

Niraj Mansingka, Analyst No, I just asked about the revenues.

A. K. Srinivasan, GM‐Chief Corporate Finance You want the revenue?

Niraj Mansingka, Analyst Yeah. Yeah.

A. K. Srinivasan, GM‐Chief Corporate Finance It is around 10,101 crore.

Niraj Mansingka, Analyst 10,101 crore?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah. And sir, any color on the Syrian fields ‐‐ of the production, any color that you've got?

A. K. Srinivasan, GM‐Chief Corporate Finance You're talking of Syria?

Niraj Mansingka, Analyst Yeah.

A. K. Srinivasan, GM‐Chief Corporate Finance As such with Syria we do not have any communication and operator at the location and fields are occupied by the rebel group. So, we are not able to say anything.

Niraj Mansingka, Analyst Okay. And any color on the Imperial Energy schemes that you have...?

A. K. Srinivasan, GM‐Chief Corporate Finance

Yeah, currently we are producing at the rate of 9500 bopd. And still we are further the right technology for the right reservoir. So, this is a scenario, current scenario.

Niraj Mansingka, Analyst But, there were some news on, it was that you had frozen some contractors to do the drilling for the tight gas. So, any more color on that, like how much time will it take after you decide on the tendering mechanism and who will win the particular contract? How much time do you see the results to be known?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah. As per the tendering and after finalization of the contract, this is going to take place in this fiscal year 2014. I mean, 2013, 2014.

Niraj Mansingka, Analyst Okay.

A. K. Srinivasan, GM‐Chief Corporate Finance So by mid 2013, 2014 we are expecting. Mid 2013, 2014 you will get some clarity on how the things will skill up. Am I right?

A. K. Srinivasan, GM‐Chief Corporate Finance Yes.

Niraj Mansingka, Analyst Okay. Thank you very much. Bye.

A. K. Srinivasan, GM‐Chief Corporate Finance Thank you.

Operator Thank you, Mr. Mansingka. The next question of the day is from Mr. Amit Shah from BNP Paribas. Mr. Shah, your line is unmuted. Now, you can go ahead and ask your question.

Amit Shah, Equity Research Analyst Thank you. Hi, good evening, sir. Just one question on ‐‐ what's your understanding of an expectation from Cairn from Rajasthan, because we understand that production there is either getting delayed that is ‐‐ these are getting delayed or we're also seeing Mangla probably seeing a slightly earlier decline?

Unidentified Speaker No, presently, as far as this is concerned, we've no idea about it because no proposals have come for augmenting or any delay. So presently, we are just going with 175,000 barrels loss of, that sort of thing which is known to us. And if anything is happening, again it has to put up to the OC and then subsequently take it up for the MC approval? As of now it stands at 175,000.

Unidentified Participant Okay sir, thank you very much. That's it.

Unidentified Participant Thank you Mr. Shah. The next question is again from Mr. Mayur of Spark Capital. Mr. Mayur your line is unmuted now.

Mayur Patel, Analyst Yeah. Sir, what was the depletion rate in this quarter and has it increased over Q‐o‐Q?

Unidentified Speaker No I couldn't get your point, please.

Mayur Patel, Analyst What was the depletion rate in this quarter?

Unidentified Speaker No, it is a term used regarding the, only what happens, some results were upgraded for ‐‐

Unidentified Speaker For half‐yearly.

Unidentified Speaker For half yearly basis and accordingly, the rate has ‐‐ the rate remains the same for us. It is based on the European basis.

Mayur Patel, Analyst Okay. And sir, just want to understand for gas rate hike ‐‐ you must be pushing Ministry and presenting some kind of rational or you can say arguments. Can you just touch up on apart from the isolated field so‐‐?

Unidentified Speaker Absolutely, this all came out in the media through Rangarajan Committee's report. And as far as the price (inaudible) ONGC is concerned, because this price primarily doesn't fall due as per the office order which has been issued for our price increase. We are not sure whether, how the government is going to take up for this increase in price of a dollar. So the, definitely we assure that the price for Reliance is due to happen somewhere in July, I mean FY' 14. So based on that, either something may happen. As of now, we don't have any clarity on that.

Mayur Patel, Analyst Yeah but sir, just want to understand on the cost front. Is it you are expected on the cost at $4.2 or you don't believe it?

Unidentified Speaker No, we are ‐‐ our cost is around 3.7 or something. We're just making a clause on that. So that, we are not having any losses on that price.

Unidentified Speaker Mayur Patel, Analyst But on the existing APM you can continue at 4.4, there also there are some ‐‐?

Unidentified Speaker No, if said loss been in terms of connecting on it because for each incremental oil and gas we've to pay more next because that when it was ‐‐ so it was kind of key not spontaneous, for each incremental oil and gas we've to invest more. So both the despite even better.

Mayur Patel, Analyst Okay, sir last question, on I just missed the exceptional cost and exceptional income in this quarter was ‐‐?

Unidentified Speaker No, no it was I think in this quarter we had just compared our results primarily based on our Q3 of FY'12, wherein we had an excess of income of 3142 on account of Cairn India. That was only ‐‐ if you remove that adjustment then our profit has increased over the previous year.

Mayur Patel, Analyst No with related OMC there was no exceptional item with?

Unidentified Speaker Nothing.

Mayur Patel, Analyst CST cost related to VAT, Octroi or something you?

Unidentified Speaker No, that we've made of provision because what has happened after the post discount from adjustments were carry down VAT, Octroi and CST against that we've provided 360, ‐‐ 380 crores, I think we had done made a provisional against that and we ‐‐ issues has being taken off when it's normal and if that comes to that will return back to us.

Mayur Patel, Analyst So, but otherwise next quarter also you I'll make similar provision? No, by then some clarity should emerge by the end of March.

Mayur Patel, Analyst Okay and okay fair enough. Thanks.


Operator

Thank you, sir. The next question is from Mr. Amit Rustagi of Antique. Mr. Rustagi, your line is unmuted now. You can go ahead and ask.

Amit Rastogi, Analyst Sir, if we look at the discount given by us during this quarter it has fallen to roughly $62 or our net relations have gone up other way to say that our net relations have gone up, despite our production is flat government is charging $56 per barrel. So what is the reason for this?

Unidentified Speaker See the problem is the entire discount ‐‐ giving this on the volumes of gas, oil plus the constancy.

Amit Rastogi, Analyst Yeah, yeah, yeah right

Unidentified Speaker So due to which the impact goes to 62. If you take only the volumes of our crude oil, we made exclude this portion or we condensate them to $56 hold down, but we've a volume of condensate also built into that will be add upon to that then the discount goes up to 62 plus.

Amit Rastogi, Analyst Sir anyway for reporting purposes we've started showing it different number in terms of Oil production and condensate production now?

Unidentified Speaker Absolutely. Yeah, so government is still charging us on condensate?

Unidentified Speaker Yeah. They are charging on the port fee [ph] put together that's why those problems.

Amit Rastogi, Analyst Okay. But, sir, still it should have been similar to last quarter, because if you see we have been giving 12,350 crores as a discount roughly in last two quarters and so my net relations this time, it is coming at $47.9 expected income...

Unidentified Speaker No, last year my average...

Amit Rastogi, Analyst Last quarter I am saying, Q2.

Unidentified Speaker US 46.7.

Amit Rastogi, Analyst Yeah, 46.7 and this time it is 47.9.


Amit Rastogi, Analyst So formula is same, 56 dollar on condensate including production.

Unidentified Speaker By exchange ‐‐ there was a gain of exchange benefit, exchange benefit is also there.

Amit Rastogi, Analyst Sir, the ‐‐ that is rupee depreciation. Okay. No, sir but that is $56 per barrel, is it sir? See, dollar price will be ‐‐ gross price has also gone up, no. Because 109.8 crores, and now three ‐‐ third quarter it is 110.16.

Amit Rastogi, Analyst Sir, it is hardly 36?

Unidentified Speaker So that is the only difference, no.

Amit Rastogi, Analyst And said, change in our net realization is $1.2?

Unidentified Speaker Yeah, I think is (inaudible).

Amit Rastogi, Analyst Yeah, yeah.

Unidentified Speaker We'll come back on this.

Amit Rastogi, Analyst Okay, sir. Yeah.


Right. We'll come back on this.

Amit Rastogi, Analyst Yeah. Thank you, sir.

Operator Thank you Mr. Rastogi. The next question is from Mr. . Mr. Mansingka your line is unmuted, you can go ahead and speak. Yeah. Sir, just wanted to know the sequential production increase has been 4.71 million tons last quarter going to 4.91 million tons in the quarter ending December. I wanted to check with you what ‐‐ which particular field have caused this increase and how sustainable do you see?

Unidentified Speaker No, no, actually what has happened, this increase in the present quarter is primarily on the reconciliation factor getting improved and due to this there is some ‐‐ more sale in the current quarter.

Niraj Mansingka, Analyst Okay. You're telling the sales number at slightly higher, right?

Unidentified Speaker Yeah, that's what I am saying, the production is remaining flat but our reconciliation factor has contributed in getting more of our sales.

Neeraj Man Singh, Analyst So, do we see this delta movement also come?

Unidentified Speaker Yeah, it will be there.

Neeraj Man Singh, Analyst Okay. Second thing sir, let, how ‐‐ right now we are seeing the ONGC percent remaining now flat range of 5 point, last three quarter 5.64, 5.62 and 5.68 million tone. So, when do you see that growth starting getting reflected from the new fields are coming on production, from which quarter onwards you see that happening?

Unidentified Speaker No this project, new field as explained by my colleague, the new field are putting ‐‐ the facilities have been put in place, the drilling is on, the production is likely to happen only from the next financial year onwards and that has been reflected through our target, as already been spelt out earlier.

Neeraj Man Singh, Analyst Oh, sir I was trying to get more specific in which month or which quarter you expect taking the production to happen?

Unidentified Speaker Unidentified Speaker

That month cannot be defined, because it has splitted as well as with the some decline in the‐‐.

Unidentified Speaker Actually what happened, as the drilling is progressing, the wells which are getting completed, they get connected. So, it's very difficult to attribute which well, but a particular thing is adding into the production. So, when all the wells are completed on a particular platform, then there is a measurement can be found.

Neeraj Man Singh, Analyst Yeah, that, that, yeah

Unidentified Speaker So, it is a process, continues process of drilling completions and then getting connected.

Unidentified Participant Right, got it, got it. Yeah, that's all. Thank you, bye.

Operator Thank you Mr. Man Singh. (Operator Instructions). So, there is a question from Mr. Vidyadhar Ginde from BSP Merrill Lynch. Mr. Ginde your line is unmuted now, you can go ahead and ask.

Vidyadhar Ginde, Analyst Yeah, thank you. Good evening, everyone. I had a few questions. One is, how confident are you about this volume nomination production next year and related question to that is, I think, the number which you have quoted in the call today 25%. Is it ‐‐ it's the spin number I think which you had last quarter. And so, and it looks now probably not going to meet your FY '13 rate of 23.64 which you had told earlier. So, for next year even if you are confident of increasing, is it roughly 2 million tone increase or are you confident of the number of 0.780

Unidentified Speaker Actually the GPR on net year may be around 25, the target is 25.79 and these may be (inaudible).

Amit Rastogi, Analyst No, no because where I'm coming from is that, current year is going be more like, somewhere between 20 to 21 million tons, so if I take 25.79, then it is actually almost over a five million. So should I look at more of that or is it if you look at it for guidance for FY '13 and '14 the delta is around two million tons, so is that a kind of production increase I

Unidentified Speaker We stand by the numbers what we are quoting at present and we think that the phase when they start coming on your production, then it is the numbers you can match.

Amit Rastogi, Analyst So you think you can add five million tons production because this year is going to end at somewhere between 20 to 21 million tons.


‐‐ for 23.

Unidentified Speaker Yeah of course but.

Amit Rastogi, Analyst No no I'm looking at only production because you've done 15.38 million tons in the nine months. If you're keeping another 5.2, so you get to somewhere between 20.6 million tons here.

Unidentified Speaker No you're correct, but why we conference is about, given additional production we are expecting to come and then there are many margins which is like cluster 7 (inaudible) and this course also many of them like the one who is supposed to come here, so team is already come so inclusive of this side we are hopeful that we will able to meet that target.

Amit Rastogi, Analyst But my question is that should I more like two million ton increase a year and year is likely or five because two is the difference between what you have guided last year for current year and next year, little over two million tons, whereas if I just stick to your actual number of, it's a five million tons which is a very big increase.

Unidentified Speaker No the thing is, our marginal fields will come on production from '13, '14 onwards, the late '13, '14 onwards, so we are hopeful that these ‐‐ we will have to match our production work what we have given.

Amit Rastogi, Analyst So can we, marginal field add about 100,000 barrels per day next year.

Unidentified Speaker D1 fields also.

Amit Rastogi, Analyst Sir that is fine, but can it add five million ton over the 100,000 barrels per day. Can so much increase up in next year.

Unidentified Speaker No, no. They're testing something about 9 to 10 million tons per marginal field in the next four to five years


Unidentified Speaker And suspend the one that will add up.

Amit Rastogi, Analyst

And none of these fields have occurred as yet.

Unidentified Speaker No GS‐15 that's come up, G1 is supposed to come later.

Amit Rastogi, Analyst So, but most of it has not come up.

Unidentified Speaker No marginal fields are yet, drilling now, and next year it will be available.

Amit Rastogi, Analyst So when all these fields are developed, 9 million to 10 million tons will get added?

Unidentified Speaker Absolutely. Next five years, it will... Okay. And is this the rise of 9 million to 10 million tons evenly spread over the next few years or is it concentrated in some specific years?

Unidentified Speaker It is still even, it's low.

Vidyadhar Ginde, Analyst Pardon me?

Unidentified Speaker The peaking is, peak is there particularly after two years, then there will be a decline, a natural decline there.

Vidyadhar Ginde, Analyst No, no, no, what I am asking is that is this ‐‐ several fields getting developed over the next four, five years, 9 million to 10 million tons over four, five years, are the start of these production sort of concentrated in say FY '15 or is it about one, one and a half, two million tons every year over the next four, five years?

Unidentified Speaker So number would be high in the first two years.

Vidyadhar Ginde, Analyst And all these fields start producing in the next two years?


Yeah.

Vidyadhar Ginde, Analyst Okay.

A. K. Srinivasan, GM‐Chief Corporate Finance It just started in this '13 end itself, I mean ‐‐

Unidentified Speaker A. K. Srinivasan, GM‐Chief Corporate Finance Exactly delayed.

Vidyadhar Ginde, Analyst And the peak is roughly how many years after start?

A. K. Srinivasan, GM‐Chief Corporate Finance After one year, two years.

Unidentified Speaker Two years.

Vidyadhar Ginde, Analyst Okay, okay. So roughly FY '15, '16 could probably be the peak of a lot of these...?

A. K. Srinivasan, GM‐Chief Corporate Finance FY '15 would be the peak.

Vidyadhar Ginde, Analyst Okay, thanks. The second question I had was related to the JV production and sales. I think in the whole of this nine‐month period this year as well as in each of the quarters, the sales volume for JV is higher than the production volume. Is it related to this Rajasthan entry relating to royalty or ‐‐?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah, it is ‐‐ between the EPI and DA.

Vidyadhar Ginde, Analyst So, it is that basic and that is the reason for the ‐‐ now, the production is accounted on a different basis than a sales volume on a ‐‐?

Unidentified Speaker Different basis.


Exactly.

Vidyadhar Ginde, Analyst Okay, okay. Thank a lot, sir.

Unidentified Speaker Okay.

Operator Thank you, Mr. Ginde. The next question is from Neil Gupte from JP Morgan. Mr. Gupte, your line is unmuted now.

Neil Gupte, Equity Analyst Thanks for taking my question. I'm just a bit earlier in the call, could you just repeat what your production target for crude is for FY '14?

A. K. Srinivasan, GM‐Chief Corporate Finance FY '14?

Neil Gupte, Equity Analyst Yeah.

A. K. Srinivasan, GM‐Chief Corporate Finance It is 25.78 for the nominated blocks.

Neil Gupte, Equity Analyst Okay.

A. K. Srinivasan, GM‐Chief Corporate Finance And 3.31 for the JV blocks.

Neil Gupte, Equity Analyst Okay. Thank you. Thank you, Mr. Gupte. The next question is from Mr. Rohit Nagraj from Centrum Broking. Mr. Nagraj, your line is unmuted, now you can go ahead ask.

Rohit Nagraj, Senior Research Analyst Sir, can you provide some update on the Carabobo project, what is the current status?

Unidentified Speaker Yeah. Carabobo 1, first well on 27th of December, we started producing and we are producing at the rate of around 350 barrels per

day. And second well is almost ready, it is just required to be hooked up. So very shortly we are going to get production from (inaudible).

Rohit Nagraj, Senior Research Analyst Okay. Any understanding in terms of FY '14, what it would add to oil production?

A. K. Srinivasan, GM‐Chief Corporate Finance We had kept the target of 0.08. Yeah, 12,000 bopd per day for the FY '14, we have kept.

Rohit Nagraj, Senior Research Analyst Okay. Thank you.

Operator Thank you, Mr. Nagraj. The next question is from Mr. Miten Lathia of HDFC Mutual Fund. Lathia, your line is unmuted now.

Miten Lathia, Analyst Sir, just to clarify this 9 million to 10 million tone incremental production from marginal feeds. It is oil plus gas, is it? Or is it only oil?

A. K. Srinivasan, GM‐Chief Corporate Finance Oil plus gas.

Miten Lathia, Analyst Okay, could you provide a rough split of how much oil and how gas are you talking here?

A. K. Srinivasan, GM‐Chief Corporate Finance One second ‐‐ we'll come back again, because we are not having ‐‐

Unidentified Speaker Currently we are not having the breakup.

Miten Lathia, Analyst Okay.

Operator Thank you, Mr. Lathia. The next question is from Mr. Niraj Mansingka from Edelweiss. Mr. Mansingka, your line is unmuted now.

Niraj Mansingka, Analyst Sir, just to clarify the production target that you set of 25.78, the corresponding number for the last December 2012 quarter, was it 5.16 or 5.68? I'm telling you like‐to‐like comparison of the 435.78 that you referred to the targets of production for the crude oil.


It's 5.68.

Niraj Mansingka, Analyst 5.68. And so actually the last call we had, I think, Vidya had asked this question and was listening to 15.39 million tones, cumulatively products which is only the production of crude not adding the condensate. So effectively the increment production that will be required from this year will be close to 3 million tones or 5 million tones? Is it the correct statement?

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah, it is a correct statement.

Niraj Mansingka, Analyst Okay. Yeah, got it. Thank you very much.

A. K. Srinivasan, GM‐Chief Corporate Finance Bye. Thank you, Mr. Mansingka. (Operator Instructions) The next question is from Mr. Vidyadhar Ginde, of Bank of America‐Merrill Lynch. Mr. Ginde, your line is unmuted.

Vidyadhar Ginde, Analyst Yeah, thank you. Just to clarify the guidance which you have for next year of 25.79 is crude oil plus condensate, is it?

A. K. Srinivasan, GM‐Chief Corporate Finance Yes. Yes.


Vidyadhar Ginde, Analyst It's a crude oil plus condensate number?

Unidentified Speaker Yes.

Unidentified Speaker Yes.

Unidentified Participant Okay. Okay, thanks.


Thank you.

Unidentified Participant One more question, what is the ‐‐ what about OVL, when is OVLs 3Q results likely to be announced?

Unidentified Speaker On 16th, ‐‐ 3Q? I think Board meeting is scheduled... For 15th, okay, thanks.

Unidentified Speaker 16th, 16th February.

Unidentified Speaker Thank you Mr. Ginde.

Unidentified Participant Yeah, thanks.

Operator The next question is from Mr. Puneet Gulati of HSBC. Mr. Gulati, your line is unmuted now, you can go ahead and ask.

Puneet Gulati, Analyst Yeah. Thank you, just wanted to understand this one the sales number has gone up from 2463 crores in the previous quarter to 2844 crore without very ‐‐ similar increase in production what's happening on that side, what are we missing?

Unidentified Speaker Actually that rate of sales...(inaudible)

Puneet Gulati, Analyst Yeah.

Unidentified Speaker has been increased from 2,500 per metric ton to 4,500 per metric ton.

Puneet Gulati, Analyst Correct, but compared to the previous quarter?

Unidentified Speaker Unidentified Speaker Previous quarter.

Puneet Gulati, Analyst Previous quarter, sir, Q2 FY 2013, the rate would have been similar, why it is...

Unidentified Speaker The same.

Unidentified Speaker Almost same, 2,562 and 2,463.

Unidentified Speaker The section is of (inaudible)

Puneet Gulati, Analyst Yeah, but your total production has gone up by now 1%.

Unidentified Speaker (inaudible) same no, 2,463...

Unidentified Speaker Acknowledged quantity, based on acknowledged quantity the sales is being favored.

Puneet Gulati, Analyst Okay. Okay, thanks, thanks.

Operator Thank you Mr. Gulati. (Operator Instructions).

Unidentified Speaker I Think Mr. Tanmay, we will be able to take another last one or two questions.

Operator Sure, sir.

Unidentified Speaker Right.

Operator Thank you. We have Mr. Vidhyadhar Ginde, who wants to ask another question from (inaudible) Merrill Lynch Mr. Ginde, your line is unmuted now.

Vidyadhar Ginde, Analyst Yeah, thanks. Just wanted to on condensate or how is ‐‐ what's your realization like?

Unidentified Speaker Condensate?

Vidyadhar Ginde, Analyst Yeah.

Unidentified Speaker Condensate actually, it is being fractionated to...

Vidyadhar Ginde, Analyst Pardon me?

Unidentified Speaker It is fractionated ‐‐ two different value added products and sell it like LPG...

Vidyadhar Ginde, Analyst Oh, sir, basically it gets sourced, VAP or other than?

Unidentified Speaker Yes, Yes.

Unidentified Participant It doesn't get sold per (inaudible)?

Unidentified Speaker No, no.

Vidyadhar Ginde, Analyst Okay, okay. So, it's effectively the realization is ‐‐ is the realization of the value added products.

Unidentified Speaker Yes, absolutely.

Vidyadhar Ginde, Analyst Okay, thanks.

Operator

Thank you Mr. Ginde. The last question of the day is from Paresh Jain of IIFL. Mr. Jain, your line is unmuted now.

Paresh Jain, analyst We've been talking about a lot of marginal field gas production coming on stream in the next couple of years. Is it possible to give an exit rate for FY' 14 in terms of gas production?

Unidentified Speaker Sorry.

Unidentified Speaker (inaudible) gas production.

Paresh Jain, analyst Exit rate. Not the average production. Guidance you wanted from that sort of ‐‐.Hello, hello, hello

Unidentified Speaker It is 74.61 from domestic fields and the 1.86 from the (inaudible).

Paresh Jain, analyst That would be the average ‐‐ that would be the production for the year, total production for the year. Is it possible to give an exit rate for the year?

Unidentified Speaker No, no. We are not able to hear you. Can you speak a little louder?

Paresh Jain, analyst Hello?


Paresh Jain, analyst Yeah, now it's better?

Unidentified Speaker Yeah, it's better.

Paresh Jain, analyst I was talking about the exit rate, is it possible to give an exit rate for FY' 14?


What exactly do you mean by exit?

Paresh Jain, analyst Towards the end of the year possibly, like we might have some more feeds from engine production, so in terms of mmscmd if you can get an exit rate for FY' 14?

Unidentified Speaker That is may be, somewhere around 70, 80 million.

Paresh Jain, analyst Unidentified Speaker That is actually, we've not worked out but that is the (inaudible).

Paresh Jain, analyst All right. And sir in terms of gas price, you were saying that you were asked to how government would implement it for ONGC. I didn't get that point. Is that, that the current gas price that we are talking about is for a particular duration?

Unidentified Speaker Actually, primarily the gas price which have been implemented for ONGC from July 10, there is no timeframe check for that.

Paresh Jain, analyst Okay.

Unidentified Speaker They have just increased the price to $4.2 per btu.


Unidentified Speaker Whereas in a case of Reliance, this was implemented in 2009 and they had the timeframe of 14.


Unidentified Speaker So on ONGC, there is no clarity on that.

Paresh Jain, analyst Okay, okay. We are not sure when it is likely to come around.

Paresh Jain, analyst Okay. All right sir. Thank you.

Operator Thank you Mr. Jain. With this I hand over the floor back to Mr. Srinivasan. Over to you, sir.

A. K. Srinivasan, GM‐Chief Corporate Finance Yeah. We thank all people who participated in the phone call and wish you all the great day forward.

Operator Thank you, Mr. Srinivasan. With this, we conclude the conference call for this evening. You may all disconnect your lines now. Have a very pleasant evening ahead. Thank you.

A. K. Srinivasan, GM‐Chief Corporate Finance Thank you. Bye.

Operator Thank you sir.

ongc q3 2013 earnings call 11 febâ€™13

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