Oil and Natural Gas Corporation (ONGC) reported a weaker-than-expected Q4FY25, with a sharp decline in profit largely attributed to elevated exploratory well expenses. While revenue and EBITDA held steady, a surge in dry well write-offs impacted bottom-line performance. Despite the miss, both CLSA and Jefferies remain optimistic on the production-led growth outlook, backed by rising output from key fields.
ONGC’s standalone profit fell 22% quarter-on-quarter to ₹6,448 crore, sharply missing the consensus estimate of ₹8,804 crore. The drop was primarily driven by a near-threefold increase in exploratory well costs, which jumped to ₹4,173 crore from ₹1,467 crore in the previous quarter.
Revenue rose 4% QoQ to ₹34,982 crore, while EBITDA remained flat at ₹19,008 crore, slightly ahead of the Bloomberg poll estimate of ₹17,966 crore. Operating margin stood at 54.3%, down from 56.5% in Q3, but above the estimated 52.8%.
CLSA: Dry well impact masks operational progress, reaffirms high-conviction ‘Outperform’
CLSA maintained its high-conviction ‘Outperform’ rating on ONGC with a target price of ₹360, stating that the 22% PAT miss was driven by non-recurring dry well costs, not operational deterioration.
The brokerage noted that ONGC’s standalone oil and gas production rose 5% and 4% YoY, respectively, in Q4, led by the ramp-up of the KG-DWN-98/2 (KG-98/2) deepwater field. Gas price realization also improved by 4% QoQ, helped by an increasing share of new well output.
“Excluding the dry well provision, ONGC’s operational performance was resilient. The KG-98/2 ramp-up offers significant volume and margin visibility,” CLSA said.
Disclaimer: This article is based on the brokerage report by CLSA. It does not constitute investment advice.
