ONGC chairman and managing director DK Sarraf told CNBC-TV18 that the company will start producing gas from KG basin in June 2018.
Gas production in FY15 will be flat or lower on a year-on-year basis
With crude continuing to sell off, ONGC chairman and managing director DK Sarraf is confident the government will intervene to protect its margins by reducing its contribution towards under recoveries. In an interview to CNBC-TV18, he said the company is not worried by falling crude oil prices. He expects net realisations to rise despite the decline.
He further added that Brent crude falling is an aberration and prices will rise eventually. Crude production in FY15 will be higher on a year-on-year basis, he added.
Meanwhile India’s largest private oil producer Cairn India is convinced crude prices will remain soft for sometime.
Below is the verbatim transcript of DK Sarraf’s interview with CNBC-TV18’s Nayantara Rai.
Q: What will be the impact of falling crude prices on your realisations?
A: Subsidy burden of the government debt comes down and even for ONGC also the under recovery burden which we share with the oil marketing companies and with the government that also comes down. So, with crude prices coming down we expect that our net realisation would not be adversely impacted and it has all the potential to go up.
Q: On what basis are you saying your net realisation will not be impacted because as of now you have to pay that fixed subsidy of USD 56 a barrel irrespective of where the Indian crude basket is. We have not heard anything from the government even though there is an over recovery on diesel. How are you sounding so confident about net realisation, some analysts are fearing that perhaps it is going to fall below USD 40 in the second quarter?
A: I do not know what it would be in the second quarter, that we would know in couple of days but at the same time I am quite confident that when we are talking of FY15 the crude prices would definitely be more than what they were last year because ultimately the government considers all the facts and only then decides that how crude subsidy would be passed on to the upstream companies.
ONGC stock price
On October 13, 2014, Oil and Natural Gas Corporation closed at Rs 406.80, up Rs 2.30, or 0.57 percent. The 52-week high of the share was Rs 472.00 and the 52-week low was Rs 263.30.
The company’s trailing 12-month (TTM) EPS was at Rs 26.72 per share as per the quarter ended June 2014. The stock’s price-to-earnings (P/E) ratio was 15.22. The latest book value of the company is Rs 159.81 per share. At current value, the price-to-book value of the company is 2.55.