REPORT ON ONGC

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ONGC  Report Transcript

Oil and Natural Gas Corporation Limited (ONGC) is India-based oil and Gas Company, which is engaged in exploration and production activities both onshore and offshore. The Company is venturing out to other areas, such as deepwater exploration and drilling, exploration in frontier basins, marginal field development, optimization of field development plan field recovery and other allied areas of service sector. ONGC (incorporated on June 23, 1993) is a public sector petroleum company based in Dehradun, India. It is a Fortune Global 500 company, and contributes 77% of India’s crude oil production and 81% of India’s natural gas production. It is a highest profit making corporation in India. It was setup as a commission on August 14, 1956. Indian government holds 74.14% equity stake in this company The Company owns and operates more than 11,000 Kms of pipelines in India, including nearly 3,200 Kms of sub-sea pipelines.

It has a 71.6% equity stake in the Mangalore Refinery & Petrochemicals Limited (MRPL), and a 23% stake in the 364 km long Mangalore – Hasan - Bangalore product pipeline, connecting the refinery to Karnataka. ONGC has also ventured into Coal Bed Methane (CBM) and Underground Coal Gasification (UCG). ONGC's overseas arm, ONGC Videsh Limited (OVL), has acquired 15 properties in 14 foreign countries. ONGC is engaged in exploration and production activities. It is involved in exploring and exploiting hydrocarbons in 26 sedimentary basins of India. It produces about 30% of India's crude oil. It owns and operates more than 11,000 kilometers of pipelines in India. Until recently (March 2007) it was the largest company in terms of market capitalisation in india.. Oil and Natural Gas Corporation is India's number one corporate with significant contribution in industrial and economic growth of the country. It is a leading National Oil Company engaged specifically in exploration,

development and production of crude oil, natural gas and some value added products such as NGL, C2-C3, Aromatic Rich Naphtha and kerosene. ONGC's principle product is Petroleum. It produces as well as explores oil and natural gas from acreage's both on land and offshore in diverse logistic as well as climatic conditions. It is India's largest producers of Crude Oil, Natural Gas and LPG. http://www.studygalaxy.com/ Internationally ONGC's wholly owned subsidiary ONGC Videsh Limited has a number of existing and upcoming interests in selected oil patches discovered by it in offshore Vietnam. The operations of ONGC in India are organized and managed through geographically distinct Business Centres-also called work Centres. Each Business Centre has a substantial positional assets,

adequate infrastructure and manpower with strong institutional R & D and corporate support. The ONGC Regional Work Centres are: ? Mumbai Regional Business Centre (MRBC) ? Western Regional Business Centre (WRBC) ? Eastern Regional Business Centre (ERBC) ? Southern Regional Business Centre (SRBC) ? Northern Regional Business Centre (NRBC) ONGC has a 34,722 (as on 31-03-06) strong qualified and skilled manpower engaged in various oil and gas exploration and production activities. Among these, ONGC employs 18,000 experienced and technically distinguished scientists and engineers from eminent Universities / Institutions in India and abroad ONGC has institutionalized research and development in oil sector and established separate institutions to undertaken specific activities in key areas of exploration, drilling reservoir management production technology etc.

in the form of independently managed R & D centers. The corporate history of ONGC began in 1956, with the mandate for exploration and production (E&P) of hydrocarbons in India. Over the past 45 years, ONGC has discovered nearly six billion tones of Oil and Gas reserves in India. The Corporation is now implementing a Strategic Plan to double the reserve-base in the next 20 years. Simultaneously, major investments are being undertaken to improve recovery from the producing fields, and to bring additional reservoirs into accelerated production. A major campaign for deep-water exploration has been initiated. ONGC’s principal objective is consolidation of its core business areas that led to the need to expand its business by identifying and developing new business opportunities.

To that extent ONGC is forming profitable joint ventures related to the petroleum and energy sectors with both Indian and foreign companies. ONGC’s strategic new ventures cover: • Deep water exploration and drilling • Exploration in frontier basins • Marginal field development • Optimization of field development • Plan field recovery • Other allied areas of service Success in these highly specialized areas would require the best technology, processes and practices and the maximum use of R&D. ONGC intends to achieve this objective through strategic alliances and sustained relationships. ORGANISATIONAL STRUCTURE SWOT ANALYSIS OF ONGC Strengths: ? Dominant market position in the domestic crude oil and natural gas production business with large proven reserves. ?

It has Effective seismic survey and good liquidity position in the market with big and global business empire. ? The Earnings-Per-Share (EPS) of ONGC has continuously grown from Rs. 43.47 in 2001-02 to Rs. 101.20 in 2005-06. Post disinvestment of 10% ONGC equity in 2004, share of Foreign Institutional Investors increased from 6.2 % in March 2004 to 9.24 % in Sept 2006. ONGC has a very low financial leverage, with a debt-equity ratio of 0.002:1. ? Favorable outlook for global crude oil prices for the short to medium term. ? Strong financial position, characterized by robust profitability, low gearing, large liquid investments, comfortable debt protection metrics, and high financial flexibility; besides, ongoing deregulation of natural gas prices in phases presents considerable upside potential. ?

Company’s significant sovereign ownership and strategic importance. ? ONGC have ISO 9001 and ISO 14001 certification. Weaknesses: ? ONGC facing difficulties to produce oil from ageing reservoirs. ? Different geographical culture. ? More government interference. ? Lack of Indian vendors for new technology Opportunities: ? To venture into downstream activities like Marketing of oil In India ? To spread business global under OVL ? To spread gas pipeline in more states ? To make addition in petrochemicals & value added products ? To diversification of energy sector (CBM). Threats: ? Continuous decrease in oil & gas resources ? Strong marketing structure of other gas companies ?

Control of Govt. and PPAC regarding price fixation ? Decreasing market price of crude oil ? Government’s decision regarding fixation of price band on import of Crude Oil ? Frequent changes in technology ? Subsidy fix by government FINANCIAL HIGHLIGHTS # Due to issuing of bonus share in 1:2 ratios in 2006-07 Financial Performance: (Rs.in corer unless otherwise stated) parameters 2006-07 2005-06 2004-05 Sales revenue 56,904 48,201 46,710 Profit after tax 15,643 14,431 12,983 Contribution to exchequer 31,118 23,409 22,812 Dividend (exclusive of dividend tax) 6,631 6,417 5,704 Financial ratios: Divided rate (%) 310 450 400 Current ratio (%) 2.77 3.08:1 2.62:1 Debt equity ratio (%) NA 0.002:1 0.003:1 Earning per share (Rs) 73.14* 101.20 91.05 Book value (Rs) NA 376 325 *due to issuing of bonus share in 1:2 ratio . ?

The sales revenue is increased by 18.05%to Rs.56,904 from Rs.48, 201 in fiscal year 2006-2007.about 60%of sales revenue is from the sale of crude oil,12%is from sale of natural gas,11%from sale of value added products like LPG,10%from trading and balance 7% from others. ? Profit after tax for FY-07 increased by 8.4% to Rs.15,643 from Rs.14,431 for FY06.profit after tax growth was impacted due to higher subsidy burden paid to public sector oil marketing companies.

It is expected that the subsidy burden will nearly double for for FY08 due to fluctuation in crude oil prices in the international market. Still the company expects its profit to improve as average price realization is also expected to grow up. ? IT is also seemed that earning per share is increased in the form of bonus shares that it is proposed as 1:2 ratio till now date. The net worth of company is also grown up from Rs.56,402 to Rs.61,410. ? All of these statistics tells the robust growth of company in each financial parameter.