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Oil and Natural Gas Corporation Ltd
Earnings Call Analysis
Q2-2024 Analysis
Oil and Natural Gas Corporation Ltd
Investors may note that during Q2 FY '24, the company reported a net profit of INR 10,215 crores, down 20.3% from INR 12,826 crores in the same period of the previous fiscal year. This downward trend was also evident in the half-year figures, with a profit after tax for H1 FY '24 falling by 27.8%, from INR 28,032 crores in H1 FY '23 to INR 20,231 crores in H1 FY '24. The key drivers for this decline were attributed to lower crude oil prices, an increase in the cost of materials, and lower dividend income.
The company's sales revenue took a hit, decreasing by 8.4% to INR 3,198 crores for Q2 FY '24, and a significant 14.6% to INR 11,688 crores for H1 FY '24 compared to the previous year's corresponding periods. This reflects the reduced billing for crude oil, which in Q2 FY '24 was at USD 84.84 per barrel, a decline of USD 10.66 per barrel from the previous year's USD 95.50 per barrel. For the first half of the fiscal year, billing was at an average of USD 80.56 per barrel, down from USD 101.99 per barrel during the same period last year.
Exchange rate movements also impacted crude realization, with the Rupee-Dollar rate affecting earnings per barrel. There was an 8% decrease in realized price per barrel in INR terms for Q2 FY '24 and a substantial increase in expenditure on statutory levies and excise duties, correlating with the fluctuating crude sales price.
The exploration cost saw a reduction, owing to the strategic movement of exploratory wells to designated areas under the discovered small field rounds. This reallocation contributed to a decrease of INR 1,478 crores in exploration costs for Q2 FY '24.
Operationally, there was an upward shift in expenses. Operating expenditure ramped up by 16% to INR 845 crores in Q2 FY '24, and by 13.3% to INR 1,419 crores for H1 FY '24, with the primary factors being higher material consumption, mainly at Dahej C2-C3 Plant due to an uptick in LNG purchases, and increased costs across workover operations, maintenance, power, fuel, water injection, and transport expenses.
The company also reported a rise in depreciation, depletion, and impairment costs, with Q2 FY '24 and H1 FY '24 figures at INR 4,715 crore and INR 9,706 crores, respectively. This increase is mainly due to a reversal of impairments related to certain small fields compared to the previous year.
On the brighter side, at a consolidated level, the net profit surged by 142.36% to INR 16,553 crores in Q2 FY '24 and saw a similar rise to INR 33,936 crores for H1 FY '24, largely thanks to contributions from subsidiaries such as HPCL, MRPL, and OBL. Additionally, shareholders can expect a return in the form of an interim dividend payout of 115%, translating to INR 5.75 per equity share of INR 5.
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Good morning, ladies and gentlemen. I'm Pelcia, moderator for the conference call. Welcome to ONGC's Q2 FY '24 Earnings Conference Call. We have with us today Mrs. Pomila Jaspal, Director Finance; and a team who will interact with investors and analysts to discuss Q2 earnings.
[Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Madam Pomila Jaspal. Thank you, and over to you, ma'am.
Thank you. Good morning, ladies and gentlemen. Just to introduce, I am Pomila Jaspal, Director of Finance, ONGC. I welcome you all in this ONGC earnings call for quarter 2 and 6 months financial year '23-'24. Thank you all for joining us on the call. I am joined here by my colleagues, Mr. K.C. Ramesh, Chief Corporate Finance and Accounts; Mr. Anil Kumar, Chief Commercial; Mr. D. Adhikari, Chief BD and JV, ONGC; Mr. Pavan Aggarwal, Chief Corporate Planning; Mr. B.R. [indiscernible], Head of Finance -- Head Corporate Accounts; Mr. Vinod Hallan, Head Finance, ONGC Videsh Limited; Mr. Mukul Bhatnagar, Head Planning and Strategy, ONGC Videsh Limited; Mr. Prakash Joshi from Investor Relations and Corporate Section; and Mr. Frank from ONGC Videsh Limited heading the corporate accounts.
ONGC has compiled its financial results for the quarter and 6 months ended 30th September 2023, which have been reviewed by the statutory auditors. The financial results produced on 10th November '23 through a press note and sent to the stock exchanges. This has also been sent to the analysts who are there on our mailing list.
Here is a brief synopsis of the results. The company has earned a net profit, that is profit after tax of INR 10,215 crores during the second quarter of financial year '24 as against INR 12,826 crores during the second quarter of financial year '23, a decrease of INR 2,610 crore, that is 20.3%.
The profit after tax for H1 financial year '24 has decreased by INR 7,801 crore, that is 27.8%, from profit after tax of INR 28,032 crore in H1 financial year '23 to INR 20,231 crore in H1 financial year '24. The decrease in net profit during quarter 2 financial year '24 and H1 financial year '24 is on account of lower sales revenue, mainly due to lower crude oil and WAC price realization, then provision of GST on royalty and lower dividend income.
The sales revenue for quarter 2 financial year '24 and H1 financial year '24 has decreased by INR 3,198 crore, that is 8.4%, by INR 11,688 crore, that is 14.6% as against the corresponding quarter and H1 of previous year.
The billing that is net of value-added tax/CST for crude during the second quarter of the current fiscal was at USD 84.84 per barrel as against USD 95.50 per barrel in the same period of last year, that is a decrease of USD 10.66 per barrel.
The exchange rate of rupee versus dollar stood at INR 82.66 vis-a-vis INR 79.81 per dollar. Thus, realization for crude in rupee terms stood at INR 7,013 per barrel in quarter 2 financial year '24 vis-à-vis INR 7,622 per barrel in quarter 2 financial year '23, that is a decrease of INR 609 per barrel, that is 8% in INR terms. Similarly, gross billing for crude during the first 6 months of the current fiscal was at USD 80.56 per barrel as against USD 101.99 per barrel in the same period of last year. That is a decrease of USD 21.43 per barrel.
The exchange rate of rupee versus dollar stood at INR 82.44 vis-à-vis INR 78.55. Thus, realization for crude in rupee terms stood at INR 6,641 per barrel in H1 '24 vis-a-vis INR 8,011 for barrel in H1 financial year '23, which amounted to an increase of INR 1,370 per barrel in INR terms.
The expenditure on statutory levies, that is royalty and excise duty, have decreased during quarter 2 financial year '24 by INR 3,841 crore in H1 financial year '24 by INR 7,004 crore, that is 27.7%, in comparison with this corresponding similar period of previous year.
This decrease in statutory levies is attributable mainly to decrease in sales price of crude oil and maybe special additional excise duty by Government of India on production of petroleum crude at a rate revised on every fortnight based on international crude price.
This SAED, in short form, on crude, which have been levied with effect from 1 July 2023, which amounted to INR 6,472 crore in quarter 2 financial year '23 and INR 3,352 crore during quarter 2 financial year '22. There is a decrease of INR 1,478 crore in exploration cost written-off in quarter 2 financial year '24 and INR 971 crore in H1 financial year '24 vis-à-vis corresponding quarter and half year period of the previous year.
This decrease is mainly due to company charging of exploratory wells amounting to INR 2,140 crore lying in the fields falling under the contract areas, offered under discovered small free rounds, that is DSF round, free by DGH and awarded to the winning bidders during the last year.
The operating expenditure has increased by INR 845 crore, that is [ 16% ], from INR 5,257 crore in quarter 2 financial year '23 to INR 6,112 crore in quarter 2 financial year '24. The increase is mainly on account of increase in consumption of materials, that is INR 308 crore, mostly at Dahej C2-C3 Plant on account of increase in purchase quantity of LNG, then workover operations, INR 54 crore, mainly at KG 98/2 block.
Repairs and maintenance, that is INR 44 crore. Power and fuel by INR 62 crore, mainly at the Western Onshore assets. Water injection at INR 89 crore and transport expenses by INR 46 crore, mainly at Mumbai Offshore due to increase in equity and the corresponding base.
Similarly, the operating expenditure in H1 financial year '24 has also increased by INR 1,419 crore, that is 13.3% from INR 10,651 crore in H1 financial year '23 to INR 12,080 crore in H1 financial year '24. The increase is mainly on account of increase in consumption of materials, that is by INR 569 crore mostly at Dahej C2-C3 Plant on account of increase in purchase quantity of LNG, then contract payment that by INR 185 crore mainly at KG 98/2 block, then repairs and maintenance by INR 222 crore, then power and fuel by INR 78 crore, mainly at Western Onshore assets, then water injection by INR 129 crore and transport expense by INR 34 crore, mainly at Mumbai Offshore due to increase in equity and the rates.
Depreciation, depletion and impairment costs, that is DD&I cost for quarter 2 financial year '24 and H1 financial year '24 stood at INR 4,715 crore and INR 9,706 crore as against INR 2,595 crore in quarter 2 financial year '23 and INR 7,105 crore during the corresponding period of the previous year.
This increase is due to reversal of impairment last year on certain discovered small fields of the company falling under 10 contract areas, which were awarded by DGS to the winning bidders.
The company at a consolidated level has earned a net profit, that is profit after tax of INR 16,553 crore during the second quarter of financial year '24 as against INR 6,830 crore during the second quarter of financial year '23, that is an increase of INR 9,723 crore, that is 142.36%.
Similarly, the company at a consolidated level has earned a net profit, that is profit after tax of INR 33,936 crore during H1 financial year '24 as against INR 15,411 crore during H1 financial year '23, that is increase of INR 18,525 crore that is [ 120.21% ].
This increase in profit can be mainly attributed to our subsidiary that is HPCL, MRPL and OBL. You will be happy to note that Board has approved interim dividend of 115%, that is INR 5.75 on each equity share of INR 5. The total payout on this account will be INR 7,234 crore.
Then friends, with this, I finish my briefing of the second quarter results for the financial year '23-'24. We will be very happy to take questions from you. We would request you to restrict your queries on financial results only. Thank you.
[Operator Instructions] First question comes from Sabri Hazarika from Emkay Global.
Yes. And I have like 2 questions. The first one is relating to KG 98/2. So I think there was a news just a couple of days before where Director Production has stated that the asset is almost ready and first oil should be expected soon. So just wanted to know any particular date when we are expecting the production of oil to commence? And whether the target for gas ramp up to 8 MMSCMD, 9 MMSCMD by May-June 2024 is like that is also final?
I think -- Mr. Pavan Aggarwal, he is our Chief Corporate Planning, so he will answer this query. Mr. Pavan?
Okay. Good morning all. With this KG 98/2, you're right that the oil production -- first oil from the 98/2 is expected very shortly. The pre-commissioning activities are already ongoing, in full swing. And we expect the first oil to be there in this month itself.
Further with respect to the ramping up of the gas production, still we have for the installation of the process platform and [indiscernible] and so that we should be able to increase our gas production from the field by May-June 2024.
Okay, sir. And just a follow-up, this oil production from KG...
Sabri, I think you should mute -- there is some sound. We can't -- some echo sound.
Yes. Is it clear now?
Yes, it's clear now.
Yes. And secondly, I just wanted to know if the windfall tax will be applicable in this 98/2 or being NELP, it is out of the windfall tax regime?
In the NELP block, there is no windfall tax.
Okay. So you will get the current marketplace in this block, whatever is prevailing without any SAED in this, right?
I'll revert back. Just we'll conform and come back to you, Sabri, for this.
Okay, sir. Yes. And second question is regarding this -- sorry, this premium gas pricing for new wells. So is there any update on the same with respect to the modalities being finalized by the DGH committee?
I think that 20% premium is applicable on the new gas on the [indiscernible] gas from the [indiscernible] in the nominated field.
Right, right. I'm talking about that only. So there was some -- I mean it was supposed to happen in 6 months from the date it was announced. So by now, I think -- is there any update on the same, I think?
I think the policies -- some communication will be coming soon and some policy will be made in this regard, but the DGH has already submitted its report to the Ministry. So they will be coming up now with this final guidelines on this. But as already stated by Mr. Pavan, the 20% increment is there on the gas from the nominated field. And that 20% is applicable for the domestic price -- from the Indian basket -- on Indian basket price.
Got it. So you are saying right now the DGH has already submitted a report, and it is with the Ministry for consideration, is that right?
Yes, yes. That's what it is our understanding.
Next question comes from Abhishek Nigam from Motilal Oswal.
So first, if you can just reiterate the production targets for '24 and '25 for oil and gas for ONGC [indiscernible] and that will be very helpful?
I think with respect to the ONGC production, the ONGC stand-alone production in the last financial year of '22-'23 was 40.21 MMBOE. And during the current financial year, we expect to maintain that number or slightly increase our numbers by around 1%. And -- moving forward to the next year [indiscernible] to increase our production by 4% to 5% over these numbers of '23-'24.
Okay. 4% to 5% over FY '23?
5% over FY '24.
Okay, okay. So if you can just...
For ONGC Videsh, for FY '24, our target is 10.68 which is 5% up compared to '22-'23. And for '24-'25, our target is 11 and the next year is 11.22, oil plus [indiscernible].
Okay. And second question, if you can just give us the CapEx guidance for '24 and '25?
So you see, actually it stays in the range of INR 30,000-or-so crores. But in the current year, we expect to increase it by 10% for the current year and the next year.
Next question comes from Kirtan Mehta from BOB Capital Markets.
A couple of follow-up questions. In terms of the KG 98/2, would you be able to share our production targets for oil and gas separately for FY '25?
Mr. Pavan is answering your query.
For FY '25, we will be starting the financial year -- when we start the first, we will be starting with 10,000 barrels, which will be gradually ramping up to 45,000 barrels sometime in '24-'25. And we will be also increasing our gas production to around 7 million cubic meter per day in the next financial year. So in terms of the oil and gas, we hope to increase -- achieve our production portion numbers of around 1.5 MMT, 1.5 MMT for oil and around 2 million cubic meter for gas.
This is for FY '25, correct?
That's right.
Just 1 more follow-up on the 20% premium for the gas field. So how is the mechanism envisaged? Would it be on the any incremental production that we do out of nominated fields or would it allow for sort of adjustment of the decline rate and then sort of look at the incremental production?
Let's wait for the policy.
Let's wait for -- but I think what you mentioned is right, it will be an incremental production for the well intervention only. For the new wells, it will be whatever the gas production is there, that will be accounted for. And for the well intervention, it will be the incremental over the -- after accounting for the decline -- that shall be -- but let's see how the policy comes through.
Right, sir. Just 1 more question on the exploration targets for the second half of the year, which are the key wells that we are targeting during the second half?
Wells?
We have got our exploration ongoing in the [indiscernible] Basin. We have got our focus areas in the Western Offshore. And we have also got our focus on this Assam-Arakan Basin. Then a few of the exploratory wells are also planned in the Bengal and the Vindhyan Basin, where these new basins have been added.
Before, madam, you go for a question, we just wanted to clarify [indiscernible] the is applicable on NELP block also.
Next question comes from [ S. Ramesh ] from Nirmal Bang Equities.
Can you hear me?
Yes, you are audible.
Yes.
Yes. So if I may just dwell on the KG gas and this incremental gas price, what is the current CapEx incurred as on date? And what will be the final CapEx on KG gas? And when you expect KG gas operation to generate positive EBITDA? Will it be from FY '25 itself or will it take 1 or 2 years?
Mr. Ramesh...
We have already -- as you know, a substantial part of the KG investment, whatever we have committed, we have already done. So around INR 26,000 crores is what we have already spent on this. So the balance amount, actually various -- the project finalizations are under focus now. So once it is done, as you around, is out INR 5 billion is what the total cost is. So the balance part is yet to be finalized, but maybe another...
Yes, by next year, basically, the...
We'll get the exact number.
Yes. This is milestone-based payment. And in the current year for the rest part of the year and in next year, the entire payment will be made as per the milestone.
Yes. So it will be completed by '24-'25.
Okay. So in terms of the contribution from KG to your P&L, when do you expect to see that happen?
Okay. So as sir told, the peak oil and peak gas is expected in 2025.
But oil production is already planned to be started like by end of this month, as Mr. Pavan was saying. So the production numbers will start from November, and it will -- the revenue stream will start in the beginning, and then it will peak in the next year.
Okay. The next couple of thoughts is, can you talk about the 20% premium on gas prices from the normalization blocks. Do you expect some benefit from that in the second half or, say, in FY '25 based on your current production plan in terms of the well intervention or additional wells being drilled? What is the thought process there?
I think we are just waiting for the policy to come in. Since the launch of this new gas pricing policy on 6th April 2023, we've already accumulated the gas from the new wells or well intervention by the end of this financial year, we shall be having around 2 million cubic meter per day of the gas from this category. So we are just waiting for the policy to come.
Okay. So on OPaL, there are 2 things: one is what is the first half result in terms of revenue and profit? And there's some news that ONGC is going to increase its equity stake from 49% to 95%. What is the status of that? And how do you see the OPaL operation progress in the coming quarters?
So I think Mr. Adhikari. He is our Chief BD, JV. So he will be answering this query. Mr. Adhikari?
Thank you for your query. OPaL is having some distorted capital structure. So ONGC is trying to correct it. So in that regard, Ministry had advised expert committee to be constituted. As per the advice of that expert committee, which is headed by a former Secretary of Government of India, our Board has submitted some recommendation which is there in the media or in the stock exchange is submitted. About INR 18,365 crore additional investment has to be done to correct its capital structure.
We are also approaching the government for allowing us to use our new gas that is the gas from the new wells and from the well interventions for the use of this replenishment gas. So that amount, as Mrs. Jaspal has already said, that will be about 2 MMSCMD by the end of this year. So we are requesting MoPNG to consider our that plea, that if they allow us to inject this new gas for OPaL plant as an exception because this plant is strategically very important for the state of Gujarat as well as the country because it has already generated about employment in that area or more than -- about 2 lakh of workers.
And it has attracted investment in the Gujarat region -- Dahej region about INR 1 lakh crores. So strategically, ONGC is trying to infuse some capital so that it becomes sustainable. So in this current year, OPaL is not expected to make any profit.
Its EBITDA -- its PAT will be definitely negative. EBITDA will also be negative -- is expected to be negative. But however, once this approval comes from the government, that is cabinet because this talks about the infusion of more than INR 5,000 crore of [indiscernible] power. So OPaL will be turned around and it will be made profitable by FY '25.
So when you were to talk about turning it around, is it based on the current spreads in the petrochemical industry? Are you expecting any improvement in the petrochemical spread?
The current -- for the last 6 months, the price has been extremely depressed. And this trend is expected to continue for another 6 months or so. We have factored in that price and even we have factored in a little bit of upcycle from '25 onwards. So until that time, until, I think, mid of '25 the depressed petrol product cycle is expected to continue. So that has been factored into this financial model.
And Just 1 thing I would like to add is that although our share will be increasing to 96%, but we are proposing this that in the period of once it gets turned over, and we will like to have our strategic partner in this. And again, we will...
We'll retain the JV characteristics of OPaL relation.
Next question comes from Vishnu Kumar from Avendus Spark.
So just wanted to understand the production you mentioned for '25, incremental will be 1.5 million tonne of oil and 2 BCM from gas for '25?
Yes, that's right.
Additional.
And this incremental, mostly it is -- I'm assuming only KG with some reduction in the [ base fee ]. So how should this appear, let's say, in '26? When you also mentioned that the KG only FY...
Yes, in FY '26 also we're set to maintain the same numbers.
So the decline curve from KG is not very steep. It is going to be pretty very normal only? Or rather, how much should we expect the decline curve for this new KG once it starts producing? And since you mentioned only...
I think, let the well start producing because whatever you do earlier, it's only a model. But to let the well start producing. Let us see its performance, then we can work out on this decline analytics and the future prediction.
But it's not a very fast decline like a 30%, 40% dip year 2 or year 3, it is just going to be very nominal.
No, no. 30%, 40% decline rate is not there. We do not go to -- those numbers. We are -- it will be a conventional numbers what we are looking and which has been modeled. But let us wait and watch wells start production.
Understood. And secondly, just to understand the netback of the new project. One, you mentioned the realization will be capped at $75, it's also part of this SAED and hence your realization will be around capped at $75, is that right?
You see that is actually because if you see the recent trend, every 15 days government has come out with SAED and we have seen a realization something around $75 to $77 -- applicable. And this is for NELP block also.
Okay. Got it. And how should we look at the netback on a per barrel basis -- or rather, if you could just help us understand the statutory levies that will be coming from for this production. Is it very different from the old -- or how should we look at it in terms of -- say, in terms of the royalty rates -- or just to explain the statuary levies on...
For NELP block...
See for NELP block, as far as crude production is concerned, royalty rate is, if it is offshore, then it is 10%. For onshore, it is 12.5%. But this is -- this block, I think 98/2, we are talking about 98/2 -- but if it is depth is more than 400 meters of water depth, then it is 5%, 0.5%, 50% for 7 years.
For 7 years, it will be half and then it will be restored to 10%.
And there is no sale. There is no sale in NELP block.
Understood. So basically, your royalty rate is only be 5% for the first 7 years.
Yes.
Yes. Yes.
And for gas also, it will be the same or will be different?
Royalty rate is 10% for gas also -- and same 50% for first 7 years.
So technically for both the oil and gas production, realization will only pay 5%, that's the only statutory levy that we have to pay. And per barrel OpEx, is it going to be materially higher versus your current existing production?
OpEx.
This being offshore, obviously, the cost of production would be much higher being deep water as compared to the onshore or the shallow water indication also. So obviously, it's going to be a little more.
Can you give me rough...
Yes, obviously, the per unit cost would depend -- also depend upon the volume. So if we -- depending upon what volume that we get from there, this would be further down.
So steady state how much? So steady state once you reach our desired numbers, what will be the per barrel costing for OpEx?
So you see the majority of the cost would be for this FPSO.
Yes. That's about $7 lakh per day in the operating cost, $700,000 plus, that is like, $609,000 plus GST of 18%. So that would be the substantial part of the OpEx as far as the 98/2 is concerned.
Okay. Got it. Secondly, on the projects that -- I mean, in the past, I think, 6 months ago, there were a lot of news articles stating that you would be tying up with some international companies for further exploration and developmental activities. Just to understand, like after many years, you brought KG-D6, do we have a pipeline of many such projects so that we can, at some point -- I mean, we are probably going to reverse our production next year decline. So do we have a series of projects that can keep coming over the next couple of years where we might see the production decline go probably leading to a growth over the next 3, 4 years steadily over the next meaningful timeframe?
I think there were a number of projects which are in pipeline and I think 9 to 10 projects worth around INR 25,000 crores are under the tendering process and which will be awarded shortly within this financial year, and they will be under construction during the next financial year.
And we will be taking a few wells for the drilling the under development plan. Like I just mention that Mumbai High redevelopment Phase 5 it's under tendering. Daman upside development project is under tendering. Additional development of North [indiscernible], development of Cluster-9, the redevelopment of Linch field in Mehsana, polymer [indiscernible] project in Bechraji, Mehsana, the development of WO-16 Cluster that is already going to be completed during this financial year.
So there are -- the number of projects are there, which are already in the tendering. Many are under the conceptualization and will be coming under further tendering this -- by the end of this financial year. So that's our hope that we have got from these projects, which will be not only able to others -- but also the declining trend of the production.
I'll put the question differently, sir. So we are doing about 21.5 MMT of -- I mean, production of crude -- and let's say, if you add another 1.5, you're mentioning, in '25, we will hit 23. If you go back probably '17, '18, '19, we were doing 25 million tonne of oil. So if we take up all these projects, gradually over the next 2, 3, 4 years, can we go back to 25 million tonne of production or that will be too ambitious?
No, you say -- what you are saying is [Foreign Language]. So that obviously is our aspiration to achieve those numbers of around 25 MMT oil, which currently are producing something around 20, and with the 98/2 will be something around 22 the next financial year. And let's hope how does well behaves and because we have got stress on the exploratory activities.
And before some new good discoveries comes on the way, and after this release of the no-go area by the Government of India. One million square kilometer has been released, of which around 0.2 million square kilometer will be coming under the ONGC line. So where we are bidding aggressively.
And we also have a great force from those areas. So let's see how this comes through, how the exploratory activities goes on. And [Foreign Language], if we get some good success, we should be able to touch 25 MMT in the future.
Got it. And just finally, on the CapEx, you mentioned that against INR 30,000 crores, INR 35,000 crore range, we'll have a 10% increase in -- from the current numbers. Is that right?
No, no. Current numbers are 30,000 crores. It could be something between 33,000 crores to 35,000 crores.
33,000 crores to 35,000 crores.
INR 35,000 crores. We were talking about possibility of $1 billion-plus in terms of renewable investments. At present, that is unlikely to happen, is that right? At least forcibly next FY '25 also, we will not include that in the CapEx?
I think recently news, there was 1 PTC which -- I think...
Actually, we are targeting INR 1 lakh crores by 2030. Mr. Adhikari can supplement this investment with respect of renewables.
Yes. In renewables and new energy front, we are working very seriously, keeping our vision of achieving carbon neutrality in Scope 1 and Scope 2 by 2038 and also to create a significant or a good amount of renewable energy portfolio by 2030.
Our target is to create a portfolio of about 10 gigawatt by 2030. Currently -- recently, we have attempted to acquire 1 company that is PTC Energy Limited that we have been selected at the H1 or now the process is still on, and it is not finalized as of yet. We are also trying to -- we are also exploring a few other merger and acquisition prospects or projects. So keeping this target of achieving 10 gigawatt by 2030. So, so far, our PTC Energy Limited, which is having a portfolio of 288 megawatt is expected to be added in our kitty by end of this year.
So what will be the investment, sir, in this?
Here, we have -- its investment will be to the tune of INR 900 crores.
[Operator Instructions] Next question comes from [ Hardik Solanki ] from Nuvama.
I just want to understand the OPaL production for the half year, if you look at the production are much higher. And if you look at the sales, sales is down. So what will be the reason for that?
In the case of OPaL as far as the production is concerned, it's targeted 5% higher as compared to '22-'23. '22-'23 actuals were 10.17. And this year, our target is 10.68. Yes, you are correct that the sales volume is down. That is mainly because of the Sakhalin, which we are waiting to get on board, the project. The Sakhalin sales is not in the...
Just hold on. Yes.
So that is explained. Actually, Sakhalin volumes are not included in the sales quantity.
Okay. Okay. And just want to understand on the windfall tax. During the quarter, the windfall tax was much higher. So just want to understand, is there any adjustment towards the inventory or some other reason to it?
Yes. There is -- in the valuation of the inventory also, we do make the adjustment with respect to the windfall tax. So that is the reason. Otherwise, if you see, compared to last year Q2, the windfall tax is much lower. Last year was much higher when we started with almost around $38 per barrel. That was INR 23,250-odd to begin with. Now it is much less. But because of the higher inventory and valuation there, it is more.
Next question comes from [ Sumeet Arora ] from Helios Capital.
Firstly, I would like to wish you and your team of very, very happy Diwali and -- Okay. So ma'am, I will not touch upon a few things because this -- if I can understand correctly, the production decline, which we were basically facing over the last couple of years has now ended. And now basically, we are on a growth path on the production of oil and gas on a combined basis. Is my understanding correct now, ma'am?
Perfectly correct.
Yes. Perfectly correct.
Okay. Ma'am now so basically just touch upon this point as an investor, you guys have done a wonderful job, so many congratulations on that. But ma'am just 1 thing I would like to bring to your and your team's attention. Is that today that there's a complete disconnect between valuation because today ONGC is the cheapest company globally in the E&C space, okay? And today, I mean, if you look at it broadly, without getting into exact numbers, our market cap is about INR 2.5 lakh crore, right? And you have done a profit of about INR 30,000 crore, INR 32,000 crore on a 6-month basis. So I mean, in terms of numbers, there is clearly a gross undervaluation in market cap of ONGC because our book value also is about INR 250 a share.
So ma'am, why don't the Board now consider going in for aggressive buyback where the Government of India does not participate and effectively increases its stake. Because I mean, we are trading even in this environment at a 3, 4 PE valuation, and we are 20% below book value. So we can actually build -- invest the wealth and ultimately it benefits the Government of India only, right? Because I mean today, if you go to see our group company, HPCL as well, we bought into it at INR 480 a share.
And today, they are performance also has been exemplary wherein their performance has also doubled in terms of physical performance and financials. So a group today, we have so much value on the table, which we can build. So ma'am, I really would humbly request if you can consider a buyback not only for you, but also for the entire group, right, because there is clear value on the table for the investors, ma'am.
See, our subsidiaries, so they are investing and that is making an impact on our financials also. And you might have seen that the consolidated profit also, you will be happy to note that there has been quite a jump in the consolidated profit. So as the buyback is concerned, because this is not the stage we -- there are so many other options are there and the government is considering certain few other options also. So it is not necessary that buyback is the only option.
So it is not ruled out also. So we will have to wait and watch. And as regards to our pricing is concerned, so you will also understand the price is picking up. It is not the cheapest company.
Today, the price has crossed the INR 200 and there is an increase of almost 40% if you consider the time this price was in November last year.
No, no, that madam, I mean, we clearly appreciate. But I'm just saying purely on valuation metrics, you are trading at sub-4 PE. So I mean, in terms of -- because ultimately, our company is always valued on its earnings potential, right? So your earnings is growing -- so I'm just highlighting that I mean you have done a wonderful job. You are doing a wonderful job, but the market should also realize that and you should get your due credit, right? So that's the only point I'm trying to share, ma'am.
Yes. See, you know that we have been very good dividend-paying company, and we have been paying extremely good dividend for past many years. Now with the given circumstances, as ma'am was saying that we need to take a considered call considering all aspects whether to go for buyback or whether the investment that we are going to make further in subsidiaries other than the core business.
So we need to take a call based on the cash flow that we have currently having. And it's a call we have to take how much we need to borrow and what kind of situation we want to be in later. So it's not that currently buyback is the only option.
We have a follow-up question from Abhishek Nigam from Motilal Oswal.
So my question is regarding the Russian assets. So there has been in policy you are currently not reporting production and profits from those assets in your financials. Is there any visibility on when the situation will get resolved and those assets formally again get transferred to you?
Yes. In case of Russia, we have 3 assets, and we are reporting production for all the assets, [indiscernible], Vankor and Rosneft. And as far as Rosneft is concerned, we are very aggressively actually going ahead and hope to very soon get the shares allotted in our name.
Lastly, we have made an application to the Russian Federation to consider receiving the abandonment funds in the ruble currency. So we hope to get a decision very soon on that. We have also concurrently approached [indiscernible] -- asked [indiscernible] to approach the Central Bank Russia to assess -- to tell us that there are no constraints in actually borrowing in rubles because the abandonment funds which we actually secured back from the JPMorgan, those are in USD and are not available actually to be spent for meeting the abandonment fund obligations. So we worked very soon, and we are very aggressive at this now, and we expect to be -- this to be closed very soon.
Okay. Okay. So that's very useful. And second question is, my understanding is that the operating profit from these assets you were just putting into a fund and it is part of your regular financials. So is it possible to let us know how much activated dividend is there in that fund?
I think you are talking about the Vankor dividend which we have received. During to the unfriendly jurisdiction in Singapore with Russia, we have not been able to repatriate the dividends which we received in Russia, and they are lying there. So the dividend is around RUB 16 billion, which are locked up in Russia. But we are trying to now actually use this money to meet the abandonment obligations in case of the other projects that's happening.
Next question comes from Iqbal Khan from Nuvama.
Sir, I just wanted to ask a question on the windfall tax. Correct me if I heard it right or wrong, you mentioned the windfall tax in this quarter was INR 6,472 crores?
Yes, we're just letting you know.
So your question was what was the windfall tax...
Yes. The windfall tax in this quarter.
Okay. No, it was INR 3,352 crores in Q2 '24.
So was there any inventory adjustment on this? If you have, then how does that -- to what extent was that adjustment done, if you consider it in USD per barrel?
Yes. What we do is normally when we value our crude inventory, we also consider the cess part. So this is the windfall part is also under the excise. So we do add this into the inventory. So current quarter, there's an increase in inventory, so we have added it. In terms of the provisions for inventory, it is INR 930 crores. So what exactly you want to know further, like...
Yes, I mean I just wanted to know in USD per barrel, how would you translate this, the realizations?
So you see around INR 3,000 crore was the outflow what has been shown, okay? Out of the INR 30,000 crore if you subtract so INR 2,144 crore. And if you divide it comes to around $8.23 barrels...
$8.23 per barrel.
That was the rate what was prevailing, if you see.
Should I explain? Yes, yes, my name is Anil Kumar. The windfall tax comes under excise law, so the -- sorry, SAED, special additional excise duty, is payable only at kind of removal.
So suppose in the month of September, some crude is produced and suppose the price is, say, $16 per barrel windfall tax, but the crude is removed in the month of October where the price is windfall tax rate is $10 per barrel, so payment will be made at to $10 per barrel, not as $16. So this is the only accounting entry, but actual payment will be based on the rates prevailing at time of removal. So these are [indiscernible].
Next question comes from Aswin Balasubramanian from HSBC Mutual Funds.
My question relates to OPaL, your subsidiary. So I had a couple of queries with regard to that. So first is you mentioned that right now, the stake would go to 96%, but later, you may bring in a strategic partner. But is that also the possibility that you're evaluating to maybe make it a wholly-owned subsidiary or sort of merge with ONGC itself?
I mean, like in the past, we've seen for OMPL, for example, it's amalgamated with MRPL and similarly, MRPL also is -- although it's publicly listed, it's majority owned by ONGC. So I mean, is the thought process that keep the majority ownership of ONGC or -- I mean, what is the thought process then in terms of strategic partner, if you're bringing like what kind of strategic partner would you be looking at? So that was 1 question.
The other question was in terms of the CapEx plans. So there were some news reports that in terms of the petchem business, ONGC through its subsidiary is planning to invest quite a sizable amount in the next few years. So what's the plan in terms of OPaL in terms of CapEx sort of going forward? If you can give some color on that. And also this approval for the equity inclusion, when do you expect that to happen?
Okay. This is D. Adhikari. Three questions you have raised. One is the OPaL strategic partner. Second is CapEx plan for the next few years in petchem and downstream business. Third is approval process for OPaL, right?
So first question, that is our strategic plan for OPaL of infusing our new partners is like this. Because this petchem industry is basically -- the agility or flexibility is the most important thing, which is -- that is addressed better when it is a JV instead of public sector subsidiary. So far it's revival or to make it sustainable, ONGC have to step in because the other 2 promotors [indiscernible] did not contribute much in the past.
So now considering the little bit distressed financial conditions, ONGC is proposing to infuse an equity at about INR 18,000 crores, INR 18,365 crores precisely. So that will make ONGC's shareholding to about 96%-plus. So this has become a subsidiary for the time being.
But our objective is not to convert OPaL, a subsidiary, neither to merge with ONGC, at least in the next 3 years, by 3 years, we will try to infuse our equity investor once it is stand-alone.
We are expecting that by 2025, FY '25, this will be turned around after infusion of this capital and ensuring a sustainable feed, gaseous feedstock for OPaL. After that, by '27, FY '27, we will try to infuse a new equity partner. So that exercise will start after it is turned around by FY '25. So this is the plan. And we would like to bring down ONCG's equity holding to 50% so that it remains a joint venture of ONGC only, not a subsidiary. This is one.
Second question is CapEx plan for ONGC downstream and petrochemicals. Yes, considering the waning demand on the motor spirit or fuel, we are focusing on increasing interest in oil to chemical kind of business or when a refineries -- in that, we are exploring 2 large projects, one in the -- in 2 different states of the country.
It would not be prudent to disclose the area. But yes, we have a plan of investing about INR 1 lakh crore projects, more than INR 1 lakh crore in 2 projects by 2028 or 2030.
So this is the plan, and our petrochemical production as of today is through OPaL and MRPL. So OPaL is definitely a flagship petrochemical project for ONGC. And we are trying to take our current petrochemical portfolio of say about 3 million to at least about 8.5 to 9 million tonne per annum by 2030. This is our vision in petrochemical and downstream front. And the...
It will be on collaborative mode.
Yes. And as far as approval for infusing the equity in OPaL is concerned, yes, our Board has given the approval. Based on that approval, we are approaching the Ministry of Petroleum so that they can take up this request or Board approval to the appropriate authority, like Cabinet Committee on Economic Affairs for expeditious approval of this process, approval for infusing additional equity to make OPaL a subsidiary temporarily and also requesting cabinet to allow ONGC to use its new gas that is the gas from new wells or the well intervention for the petrochemical business only limited to the amount of the feedstock of OPaL. Is it okay?
Yes. Just 1 follow-up. In terms of the CapEx, which you mentioned in the petchem. So would a large part be done through OPaL or is it...
No. They are separate projects. Two separate petrochemical projects we are exploring. It's not through OPaL.
And it will be on collaborative mode. It will be kind of a joint venture or that kind of arrangement would be there. So we'll be funding our share.
Yes.
Next question comes from Varatharajan Sivasankaran from Antique Stockbroking Limited.
Sir, you mentioned about the CapEx number. I'm still little confused about the things which are going down [indiscernible]. One is about your petrochemical OPaL investment. So whatever that INR 30,000-odd crores, 33,000 crore to INR 35,000 crore, does it include the OPaL investment or that doesn't?
No, it does not include the OPaL investment.
No, that is only currently which is in table basically, not the INR 18,000 crore, which is yet to be approved.
Fair enough. Secondly, we're looking after the KG basin completion by April-May next year, that development expenditure intensity should actually come down. I know that you have a lot of projects on hand -- in the pipeline, but they are yet to be approved or tendered out. So is it a fair assumption that FY '25, especially, at least 1 year, your development -- CapEx would actually come down?
No, we will be able to maintain -- our financial position is quite robust. And even after making this capital infusion once it is approved by the CCA and some of the new investments which we are talking about, we'll have -- we have the capacity to generate profits also. And definitely, we will be able to maintain the desired dividend levels.
No, the development expenditure, which you're talking about, that we have been maintaining around INR 30,000 crores over the period of last 5 years. So that as well as the Western Offshore fund is concerned, the expenditure as Mr. Pavan Aggarwal has earlier explained, there are projects which are on various stages of approval. So we -- that CapEx part in development would more or less continue to be the same. Of course, as well as the core E&P is concerned, the focus is now getting a little more.
We are trying to spend on the exploration part more so because of the government has released the no-go areas also now. So around INR 30,000 crores is what we are planning in the next 3 years, INR 10,000-odd crores in exploration, which is some increase. But yes, if you exclude the petchem and other projects which are subject to approval, the development expenditure would continue to be more or less on the same level on the core E&P sector.
Fair enough, sir. One last question on the international assets. Specifically on Venezuela and Mozambique, if you have any update, Venezuela especially given the lifting of the sanctions? Is there any thought process on further investment as well as the dividend outflow? And in terms of Mozambique, if you have any thoughts?
On the Venezuela, the sections have been lifted on 19th October, for a period of 6 months first week of April '24. And we have a team on the ground, which is in consultation with the PDVSA to actually secure crude allocations, which will actually facilitate the realization of the pending dividends.
And we are also in the talks with the banks in Venezuela to see how the funds -- remittances can take place. As of now, there are no further investment plans as far as the Venezuela is concerned. And regarding the other project you spoke, Mozambique, this project is -- maybe this year, end of this year or January '24, we are expecting a restart because the security situation has considerably improved in project area. And already 2,000 feet are on the ground, emergency work has been resumed. So there is an early start going to happen in January '24.
Next question comes from [ Roshni Devi ] from [ Argus Group ].
Regarding the Panna-Mukta oilfields, how is the production been there so far and what is the outlook on it?
I think Panna-Mukta is producing very consistently something around 7,000 to 8,000 barrels per day. And we hope that we will be maintaining the same rate in the near future.
There are no further questions. Now I hand over the floor to Mr. K.C. Ramesh, Executive Director and Chief Corporate Finance for closing comments.
Yes. Thank you, ma'am. We thank all the analysts and investors for being part of this call today. I think the outlook, as ma'am was explaining in the beginning itself, like it's pretty good now with the assured prices that we have for oil, particularly so in case of gas, for the gas well intervention and the new wells, which we are going to get 20% more.
And with the KG 98/2 on the horizon, we are expecting that the core revenue, which we have from the E&P would continue to be more if we are getting the price that the government has assured for gas. And further with the new investments in other areas like petchem and other areas, what Mr. Adhikari was explaining.
So the overall outlook looks pretty good. And with your support, we keep continuing to perform well. So thank you once again. Thank you all for being part of the call today.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.