ONGC rating: Reduce – Lower other costs behind Ebitda beat

ONGC’s reported Q1 standalone revenue of Rs 130 bn (-51% y-o-y, -39% q-o-q) came in 7% below our/Bloomberg consensus’ estimates, driven by 4% lower oil sales volumes and 6% lower oil sales realisation. However, standalone Ebitda at Rs 59 bn (-61% y-o-y, -31% q-o-q) was 16% above consensus and 63% above our estimate, driven by lower other expenses (-51% q-o-q, -16% y-o-y) owing to lesser provisioning. Q1 standalone PAT of Rs 5 bn (vs our/consensus’ estimates of a loss) was down 92% y-o-y driven by a sharp decline in crude oil prices as well as lower production due to COVID-19 lockdowns.

Oil volumes below our estimates; COVID-19 impacted gas demand
Oil production at 5.7mmt (-4% y-o-y, -3% q-o-q) and sales at 5.2mmt (-3% y-o-y, -5% q-o-q) were 1%/4% below our estimates, respectively. Gas production at 5.6bcm (-14% y-o-y, -8% q-o-q) and sales at 4.2bcm (-15% y-o-y, -9% q-q) were in line with our estimates. Value-added product sales at 0.66mmt declined a sharp 29% y-o-y.