“ONGC is currently pursuing 20 projects that are worth Rs 59,000 crores in a bid to enhance production and create infrastructure growth; another 27 projects valued Rs 20,000 crores are also upcoming. The production is slated to grow around 18% by the financial year 2025,” CMD and Director (HR) Dr Alka Mittal shared at the Investors’ & Analysts’ meet held in Mumbai on 30 May 2022.

From left: MD MRPL M Venkatesh, Director (Offshore) Pankaj Kumar, Director (T&FS) OP Singh, Director (Exploration) RK Srivastava, CMD & Director (HR) Dr Alka Mittal, MD ONGC Videsh AK Gupta, Director (Onshore) Anurag Sharma and Director (Finance) Pomila Jaspal responded to the queries of Investors and Analysts

One of the much-awaited calendar events of the energy Maharatna, the Investors’ & Analysts' Meet was held amidst a capacity-packed gathering of business analysts and institutional investors after the adoption of the annual audited accounts of last fiscal on 28 May 2022 that manifested the growth of ONGC and its group companies in the next three years. Analysts from various investment houses including UBS, Future Generali India Insurance Company, ICICI, Yes Securities, HDFC, SBI, Axis, Spark Capital, Quantum and Jeet Capital Advisors Private Limited participated in the meeting. The inquisitiveness of investors and analysts was evident from the range of questions posed by them.

Addressing the gathering on the occasion, CMD Dr Mittal extended a very warm welcome to the analysts and investors and said that they are one of the most important stakeholders of ONGC. “Hope this interaction will enrich your research about the ONGC Group”. Presenting various important milestones and achievements of the Group in the last fiscal, she said, “We are just over the rough patch in the last two years and things have started looking up.” She added, “We are looking at an uptick in our production numbers in the years to come”.

CMD Dr Alka Mittal welcoming the Investors & Analysts

Presenting the physical and financial performance of the ONGC Group, Dr Mittal asserted that ONGC has been relentlessly making efforts for nation-building in the last 65 years, anchored around the core business of oil and gas E&P. “As the nation is celebrating 75 years of independence, the role of ONGC in nation-building is very relevant.” She said that ONGC is now an integrated group and one of the highest wealth-creators to the nation, cumulatively contributing over Rs 11 lakh crores by the end of the last fiscal year.

“The pandemic slowed our investment projects but it also enabled a more technology-driven work culture. ONGC now has a Digital Center of Excellence (DCoE). ONGC is now a more robust and resilient organization. It has also added one more Basin to its map – the Vindhyan Basin. We are going aggressive on our exploration,” CMD informed the investors.

Clockwise from top left: Director (Finance) Pomila Jaspal, Director (Exploration) R K Srivastava, MD ONGC Videsh Limited A K Gupta and Director (Offshore) Pankaj Kumar responding to issues raised by Investors and Analysts

Dr Mittal then stated that ONGC has also secured around 85-90% of Blocks under OALP. The company’s CAPEX on production enhancement projects is now worth around Rs 65,000 crore and another Rs 20,000 crores are awaiting approval from the Board. Crude oil production is set to increase by 11% and natural gas by around 25% by 2024-25.

CMD noted that MRPL has turned around; OMPL and MRPL have also merged, thereby creating more group synergies. ONGC Videsh has also posted impressive results with good production performance. ONGC’s power venture OTPC, apart from delivering financial returns is making the lives of people in the northeast better. “Our ESG approach is also praiseworthy. ONGC’s investment in renewables will also grow. We will continue to leverage the Group synergies to create wealth for all our stakeholders,” Dr Mittal assured the investors and the analysts.

Earlier, Director (Finance) Pomila Jaspal, in her welcome address, greeted the investors and analysts and expressed happiness to meet them in-person after almost three years. “Our performance highlights for FY22 have been published on 28 May. ONGC has posted the highest-ever profit in FY’22. We are committed to accrete the highest-possible wealth for all our stakeholders,” she added.

ED-Chief Corporate Finance Vivek Tongaonkar presented the highlights of ONGC and its group companies for the financial year 2021-22. Some of the key highlights of ONGC presented by him are:

• Highest market cap among all CPSEs
• Net worth is 25% of all Maharatna CPSEs
• ONGC is present across the entire petroleum value chain
• Resilient and consolidated performance
• Lower Debt
• Strong credit ratings
• Discovered seven of the eight (producing) Basins
• On track to put another couple of Basins in next 2-3 years
• Accelerating exploration (focused on Category II and Category III Basins) to improve acreage, which is the most important element in the valuation of an E&P company
• Technology initiatives have given good results in production enhancement
• International outreach at the highest level
• Group subsidiaries doing well

The presentation was followed by an engaging interactive session. Issues such as monetization plans, sanctions against Russia, future gas production targets, Oil and gas price outlook, CAPEX on various projects including KG were some of the queries raised by the investors which were addressed by CMD and Directors.

Clearing the doubts of investors on windfall tax, CMD explained that ONGC is in a business where returns can be volatile; “the last two years saw low returns, so there should not be a windfall tax, especially at a time when the economy of the country requires more investment in energy projects.” She added, that the dividends are over Rs 13,000 crores on a profit of Rs 40,000 crores.

Glimpses of the Question & Answer session underway

Director (Finance) further elaborated CMD’s point by adding that ONGC is paying 42% of PAT as dividends considering the notional deferred tax under the alternative tax regime. “Historically also, there has been no windfall tax in India”, Ms Jaspal said.

On the CAPEX plans of the company, Dr Mittal said the projects have been lined up for both exploration as well as production. “Rs 31,000 crores have been reserved for exploration in the next three years. In the last five years, we invested Rs 1.5 lakh crore in CAPEX, irrespective of the crude price volatility,” she added.

Director (Exploration) R K Srivastava noted that ONGC expects to open four to five more hydrocarbon Basins in the next two to three years; “around 96,000 square kilometers of the ‘No Go’ offshore area has already cleared by the government; out of which ONGC is eyeing to accrete around 45,000 sq km.”

Director (Offshore) Pankaj Kumar said, “In the last two years, low oil prices were posing challenges in the viability of development projects, though ONGC was going ahead with most of it. Now, with the easing of prices, many more projects are being brought to the Board for approval. The CAPEX, therefore, is expected to grow.”

On crude oil flow from Russia, MD-ONGC Videsh AK Gupta explained that the recent sanctions imposed on the country have impacted the Group to a limited extent. “Two projects are working satisfactorily. There are temporary disruptions in the third, which is expected to be normalized soon with alternative measures,” Mr Gupta clarified.

On buyback plans, Ms Japal replied that the same was discussed in the 350th meeting of the Board of Directors held on 28 May 2022 that approved the annual financial results for FY’22. “DIPAM guidelines were also discussed in the meeting. The last buyback was in 2018. Thereafter, bonuses have been issued. Moreover, aggressive plans for exploration and production have been lined up. So, for now, buy back needs to wait.” she explained.

Regarding OMPL-MRPL synergy for Naphtha, MD-MRPL M Venkatesh said the synergy is flowing from crude to petrochemicals rather than Naphtha to petrochemicals. “Under the current market situation, we are analyzing every day how to leverage the impressive synergies vis-a-vis the cracks in the gasoline.”

Responding to a query on the exploration program contingent on crude oil prices, CMD said that ONGC has been bidding aggressively in the past few OALP rounds, irrespective of crude price outlook, as the economy looks up to the national oil company ONGC for more energy.

Analysts and investors listening ardently to the responses of Leaders of ONGC Group

Adding on to CMD’s response on exploration contingency on crude price, Director (Exploration) said that various variables drive exploration in India. “Deep water focus is improving because of high oil and gas prices. The government has entrusted ONGC to acquire data in unexplored areas at a fast pace. This is the right time to invest in exploration in order to create value for our country. The robust framework of testing each discovery from the economic point of view automatically takes care of crude prices. ONGC may open 4-5 Basins in the next 2-3 years.”

Talking about induction of state-of-the-art technologies in exploration, Mr. Srivastava said, “Inducting efficient AI-based data interpretation, the time-consuming factor has been reduced manifold, along with cost-effectiveness.”