India's ONGC exceeds profit expectations for the first quarter on high fuel demand

India's Oil and Natural Gas Corp. (ONGC), boosted by domestic fuel demand and a higher realisation of prices, beat the first-quarter profits estimates.

The data released by the Oil Ministry shows that India's fuel usage increased significantly in comparison to the same period last year.

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The country's strong industrial activity has helped to boost its economy. It is also the third largest oil consumer and importer in the world.

Prashant Vaisht, Vice President and Co-Head, Corporate Ratings at ICRA and vice president of the Power Sector, said that solid economic growth, higher jet fuel demand and strength in the power industry helped to drive up demand.

Early this year,

LSEG reported that ONGC had a profit for the quarter ending June 30 of 89.38 trillion rupees (about $1.06 billion), beating analyst's average estimates of 85.85 trillion rupees.

Profits from refining, marketing and joint ventures are excluded from the company's earnings.

ONGC’s crude oil realisation price, which is the price it charges for its product, grew by 8.8%, to $83.05 a barrel. This compares with $76.36 a barrel a full year earlier.

The revenue generated by the operations increased 4%, to 352,66 billion rupees.

Analysts attributed the 15% drop in profit to the windfall tax the government imposes on certain industries that experience a surge in profits.

ONGC expenses grew 19%, to 253.71 Billion Rupees. This was mainly due to an increase of 18% in the depreciation and depletion costs, as well as amortisation, impairment, and depreciation.

ONGC shares closed 6% down on Monday, amid a broader sell-off in the market.

Peer Oil India will report its quarterly results this week.

(source: Reuters)