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Oil and Natural Gas Corporation Ltd
Earnings Call Analysis
Q4-2024 Analysis
Oil and Natural Gas Corporation Ltd
For the financial year 2023-24, the company posted its highest-ever standalone net profit of INR 40,526 crore and a consolidated net profit reaching INR 57,101 crore. This signifies a robust financial health, exemplified by a significant net profit increase, particularly notable in Q4 FY ’24 where the net profit was INR 9,869 crore compared to INR 528 crore in the same period last year. This growth stems mainly from hikes in other income sources such as interest and dividends, while overall sales revenue witnessed a decline due to lower crude and gas prices.
During FY '24, ONGC drilled a record 541 wells, which is the highest in 34 years. This comprised 103 exploratory wells and 438 development wells, emphasizing their investment in expanding operational capacity. The company also made 11 new discoveries and achieved a reserve replacement ratio (2P) of 1.15, marking the 18th year this ratio has exceeded 1. ONGC also significantly increased its CapEx to INR 37,000 crore, the highest ever for the company excluding acquisitions, showcasing their commitment to growth and development.
The net sales revenue for Q4 FY '24 and FY '24 decreased by 4.4% and 11%, respectively, primarily attributed to the drop in crude and gas prices. The company’s realization per barrel for crude oil in Q4 FY '24 increased slightly to USD 80.81 from USD 77.12 in the corresponding period of the previous year. Despite these declines in revenue, effective cost management and reduction in statutory levies by 18.7% have contributed positively to the bottom line.
Investors can take note of ONGC's highest-ever total dividend payout of INR 15,411 crore for FY '23-24, which translates to INR 12.25 per share. The Board recommended a final dividend of 50%, amounting to INR 2.50 per share, bringing the total dividend for the year to a noteworthy 245%.
In terms of production, ONGC saw a 4.3% increase in crude oil production on a standalone basis in Q4 FY '24 compared to Q4 FY '23. Despite a slight decline in gas production by 3%, efforts to drill new wells and interventions in mature fields are expected to stabilize and even increase production in the coming quarters. New production has commenced from the KG 98/2 fields, with anticipated increases in both oil and gas output in upcoming quarters.
Looking ahead, ONGC has plans to ramp up production significantly. The company expects to increase crude oil production to an average of 20,000 barrels per day by Q3 and 45,000 barrels per day by Q4 of FY '25. Similarly, gas production is expected to achieve 10 million cubic meters per day by Q4 FY '25 from the current 12,000 barrels of oil and 2.4 million cubic meters of gas from KG 98/2 fields, indicating a substantial improvement in operational performance.
Efficient cost management was also highlighted with a noticeable reduction in statutory levies due to lower crude oil prices and focused efforts on managing operating expenditures. Notably, operating expenditures for FY '24 increased by 7.2% compared to FY '23, predominantly due to higher activity in Western Offshore, VAT payments, and one-time charges under schemes like Vivad se Vishwas.
ONGC’s significant CapEx plans include investments in projects such as KG 98/2 and infrastructure improvements. Future CapEx for FY '25 is estimated to range between INR 33,000 crores to INR 35,000 crores, signaling continued commitment to expanding and modernizing operational capabilities.
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Good afternoon, ladies and gentlemen. I'm Pelsia, moderator for the conference call. Welcome to ONGC's Q4 FY '24 Earnings Conference Call. We have with us today Mr. Manish Patil, Director, HR; Mr. K.C. Ramesh, ED, CCF and CFO; and team who will interact with investors and analysts to discuss Q4 earnings. [Operator Instructions] Please note that this conference is recorded.
I would now like to hand over the floor to Mr. Manish Patil for his opening remarks. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. Just to introduce, I am Manish Patil, Director, HR, ONGC. I welcome you all in this ONGC Earnings Call for Q4 and FY '24. Thank you all for joining us on the call. I'm joined here by my colleagues from ONGC, Mr. K.C. Ramesh, ED, Chief Corporate Finance and CFO; Mr. Pavan Aggarwal, Chief Corporate Planning; Mr. Ashok Kumar, Group General Manager, Business Development; [ Mr. Devendra Kumar ], Chief Commercial; Mr. B. R. Subudhi, Head, Corporate Accounts; Mr. Prakash Joshi, Head, Corporate Budget and Investor Relations; and Mr. Lakshman Gora from Corporate Finance. Mr. Vinod Hallan, Head, Finance; and Mr. Mukul Bhatnagar, Head, Planning and Strategy have joined from ONGC Videsh Limited.
Let me share with you with all of you that in FY '23-'24, we have posted highest-ever stand-alone net profit of INR 40,526 crore, highest-ever consolidated net profit of INR 57,101 crore and highest-ever total dividend of INR 15,411 crore.
We have made total 11 discoveries during the year, and our reserve replacement ratio, 2P, was 1.15, more than 1 for the 18th consecutive year. ONGC drilled 541 wells, the highest recorded in the past 34 years, comprising 103 exploratory and 438 development wells. ONGC invested around INR 37,000 crore CapEx in FY '24, thus achieving highest-ever utilization, excluding acquisitions in the financial year for strengthening the growth prospects of the company.
To counter the decline in production from some of the mature and marginal fees, ONGC is taking proactive steps by implementing well interventions and advancing new well-drilling activities. The result of these efforts is becoming evident, and it is heartening to share that crude oil production on a stand-alone basis was up by 4.3% in Q4 of FY '23-'24 as compared to Q4 of last year. Crude oil production, including JV share, was also up by 2.4% in the quarter 4 of this year.
Although there were decline in gas production by 3% during Q4, the decline in production from mature fields will be further compensated in the upcoming quarters with commencement of additional production from upcoming projects, which are under various stages of development. Crude oil production has already commenced from KG 98/2, and hopefully, we will be better placed with the coming up of additional oil and gas in the subsequent quarters.
The Board has recommended final dividend of 50%, that is, INR 2.50 on equity share of INR 5 with payout of INR 3,145 crore. This is in addition to 2 interim dividends of INR 9.75, 195%, with payout of INR 12,266 crore. The total dividend for FY '24 -- '23-'24 would be INR 12.25 per share, 245%, with a total payout of INR 15,411 crore, the highest-ever dividend.
Our consolidated financials are also robust with the highest-ever net profit of INR 57,101 crore, with the increment coming from the subsidiary, HPCL and MRPL.
Now for giving you all a brief synopsis of the results, I hand it over to our Chief Corporate Finance and CFO, Mr. K.C. Ramesh. Thank you.
Thank you, sir. Good afternoon, ladies and gentlemen. Just to introduce, I'm K.C. Ramesh, ED, CCF and CFO, ONGC. I welcome you all in this ONGC Earnings Call Q4 and FY '24. As our Director, HR has already explained the major highlights, now I'll take you through the numbers in some more detail. ONGC has compiled its financial results for the fourth quarter and the year ended 31st March 2024, which have been reviewed by the statutory auditors. The financial results have already been released on 20th of May 2024 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 of the synopsis of the results.
The company has earned a net profit, that is, profit after tax of INR 9,869 crore during the fourth quarter of FY '24 as against restated profit of INR 528 crore during fourth quarter FY '23. That's an increase of INR 9,341 crore.
The profit after tax for FY '24 has increased by INR 429 crores from the restated profit after tax of INR 40,097 crore in FY '23 to INR 40,526 crores in FY '24. The increase in net profit during the Q4 FY '24 and FY '24 is on account of the increase in the other income, that is, interest, dividend and exception item, which was there in the last year but not in the current year. As you all know that last year, we had taken a hit of around [ INR 12,000-odd crores ] on account of booking GST on royalty, of which the exceptional item was around INR 9,285 crores.
The sales revenue for Q4 FY '24 and FY '24 has decreased by INR 1,571 crores, that is, 4.4% and by INR 16,980 crores, that is, 11% as against the corresponding quarter and the previous year mainly due to the lower crude and gas prices. These revenues are, of course, before the SAED adjustment.
The billing, net of VAT and CST for crude during the fourth quarter of the current fiscal, was USD 80.81 per barrel as against USD 77.12 per barrel in the same period of the last year. That is an increase of USD 3.69 per barrel. The exchange rate of rupees versus dollar stood at INR 83.03 vis-Ã -vis INR 82.26 in the last year. Thus, the realization for crude in rupee terms stood at INR 6,709 per barrel in Q4 FY '24 vis-Ã -vis INR 6,344 per barrel in Q4 FY '23. That is an increase of INR 365 per barrel or 5.8% in INR terms.
Similarly, the gross billing for crude during the current year was at USD 80.77 per barrel as against USD 91.90 per barrel in the same period of the last year. That is a decrease of $11.13 per barrel. The exchange rate of rupee versus dollar stood at INR 82.79 vis-Ã -vis INR 80.39. Thus, the realization for crude in rupee terms stood at INR 6,687 a barrel in FY '24 vis-Ã -vis INR 7,388 a barrel in FY '23, which amounted to a decrease of INR 701 per barrel. That is 9.5% in INR terms.
The expenditure on statutory levies, that is, royalty, sales and excise duty, have decreased in FY '24 by INR 8,486 crores. That is 18.7% in comparison with similar period of the previous year. This decrease in statutory levies is attributable mainly to the decrease in sales price of crude oil and natural gas and levy of special additional excise duty by the Government of India on production of petroleum crude at a rate revised every fortnight based on international crude price. This SAED on crude have been levied [ because of from ] 1st July 2022, which amounted to INR 11,004 crore in FY '23 and INR 8,661 crore during FY '24.
The operating expenditure has increased by INR 280 crores, that is, 3.5% from INR 7,986 crores in Q4 FY '23 to INR 8,266 crores in Q4 FY '24. Similarly, the operating expenditure in FY '24 has increased by INR 1,803 crores, that is, 7.2% from INR 24,922 crores in FY '23 to INR 26,725 crores in FY '24. The increase is mainly on account of the increase in other expenses, that is, by INR 901 crore, mainly at Western Offshore; by INR 615 crores towards [ VAT ]; [ MST ], INR 160 crores; interest payment towards Vivad se Vishwas, INR 393 crores; and increase in repair of various platforms post-cyclone repair and maintenance of INR 483 crores; and also water injection costs by INR 271 crores, mainly at Western Offshore due to increase in activity; and CSR amounting to INR 198 crores.
Depreciation, depletion and impairment costs for Q4 FY '24 and FY '24 stood at INR 5,676 crores and INR 20,495 crores, respectively, as against INR 4,860 crores and INR 16,819 crores during the corresponding previous year. The depreciation for FY '24 has increased mainly at the Eastern Offshore asset, 98/2 project by INR 1,292 crores due to the depreciation on ROU asset of FPSO. The depletion for FY '24 has increased by INR 1,584 crores, mainly at Western Offshore by INR 1,446 crores due to increase of facilities and abandonment costs of various fields, change in reserve production mix of various fields.
The company at a consolidated level has earned a net profit, that is, profit after tax of INR 11,527 crores during Q4 FY '24 as against INR 6,478 crores during Q4 FY '23, that is, an increase of INR 5,049 crores amounting to 77.94%.
Similarly, the company at a consolidated level has turned a net profit, that is, profit after tax of INR 57,101 crores during FY '24 as against INR 34,046 crores during FY '23, that is, an increase of INR 23,055 crores, 67.7%. This increase in profit can be mainly attributed to our subsidiary, HPCL and MRPL.
Well, friends, with this, I finish my briefing of the fourth quarter results for the financial year 2023-'24. We'll be very happy to take questions from you. We would request you to restrict your queries on financial results only. Thank you. Thank you very much.
[Operator Instructions] First question comes from Probal Sen from ICICI Securities.
Am I audible?
Yes.
Sir, just had a couple of queries. Firstly, on this quarter results, I just wanted to understand why have the other operating expenses gone up so sharply? When I say other operating expenses, I mean, other than employee expenses and selling and administrative expenses. The other expenses line has also shown a huge increase on Q-o-Q level.
Yes, Probal, just hold on for a second.
Yes, I think, Probal, you're talking about the other expenditure of INR 901 crore if I understood correctly. This actually -- the expenses increased by INR 901 crores from INR 393 crores in FY '23 to INR 1,294 crores in FY '24. This is mainly on account of -- mainly at Western Offshore by INR 381 crores towards payment of VAT, [ MST ], which we had done in Q3 '23-'24; INR 160 crores; interest payment [ over ] settlement of Vivad se Vishwas, it is about INR 170 crores; an increase in repairs of various platforms post-Cyclone Tauktae by INR 62 crores and some repair expenditure at Assam asset by INR 191 crores due to -- and interest paid for Vivad se Vishwas, the 2 scheme of Megha at our Assam asset. And at CBM assets, there is an expenditure of INR 21 crores of repair and maintenance.
Okay. The second question was on the opening remarks, I think, sir, you mentioned that the gas decline will be compensated with the [ progress ] of new assets. So primarily, we are talking about basically the KG basin assets, at least from the context of FY '25. Or are there any other assets also that we can look forward to from a gas production perspective for next year?
Okay. I'm Pavan Aggarwal, Chief Corporate Planning. With respect to the managing the decline in the gas production, so with the current financial year of '24-'25, we envisage the increase in gas primarily from KG 98/2. However, we are also working on the monetization of the stranded gas with the completion of the Urja-Ganga pipeline and the Indradhanush gas pipeline. So we are hoping to increase our 0.3 BCM of the gas. We envisage to monetize during the current financial year from the stranded gas fields in [indiscernible], [indiscernible], [indiscernible] and Bokaro, [ Chanewala ], Gujarat, Hassan and Vindhyan basin.
Sorry, sir, could you run the asset names again? I couldn't quite catch that.
1 BCM gas from 98/2 and 0.3 BCM of the gas from the stranded gas fields in the different geographies of the country in [indiscernible], [ RSPC ] in Bokaro, Gujarat, Hassan and the Vindhyan basin and [ Chanewala ].
Understood, sir. Last question, if I may. The reason for the CapEx increase was substantially to INR 37,000 crores, which we have done. Have there been any major capitalization of certain spends that has happened? And what can we look at in terms of run rate for the next year, the FY '25?
Yes, Probal, just a second.
Yes. You might have seen that the CapEx expenditure is almost around INR 37,000 crores during this year, FY '24. And the main reason for that is the 98/2 project which we have in the East coast. We had some issues with respect to change order and settlement with the contractors as a result of change in contractors. So a large amount was spent there. And then thereafter, we had a certain expenditure on pipeline replacement project or the PRP-7 in the Western Offshore.
In addition to that, we also had settled a lot of cases through Vivad se Vishwas. That also is to the tune of around almost INR 2,000 crores in total, which we have capitalized because they were...
INR 3,000 crores?
INR 2,000 crores. There was a case [ in some ] of the projects which we had excluded earlier through engineering services in Mumbai. And the -- we had settled the dispute. So we had capitalized those to the respective projects.
Then we had created some infrastructure in Goa, basically, which was around tune of -- yes, which should cater [ the engineering cost ].
Yes, so it was around INR 250 crores, but rest of the expenditure, also we are going to incur on that.
So sir, FY '25, should we [ be building ] this time at the run rate? Or should it again normalize back to the INR 32,000 crores to INR 34,000 crores guidance that you have been giving and we have been seeing earlier?
In this, there were a number of one-offs as sir was telling, the Vivad se Vishwas. And some expenditure came off from CapEx. But you can see the range would be somewhere in the range of INR 33,000 crores to INR 35,000 crores.
Next question comes from Mayank Maheshwari from Morgan Stanley.
A couple of questions from my end. The first one, if you can just give us a bit more details around the gas production and what you were talking about in terms of opportunity to grow that production. Over the last 2 years, you obviously have kind of done a bit of work around other fields as well, but net production has still come kind of decline. So is there something that you can kind of talk about, which will help us get more confidence on the growth? And also the time lines that you're looking at on the KG 98/2 in terms of ramp-up from in fiscal '25, fiscal '26, if you can give us some details around that.
And the second question really was on OPaL if you can just give us an update of how the asset is doing. I read that you are running at 92% utilization now, but in terms of the restructuring, where are we and how you should think about that going forward.
Okay. I think your question is in 2 parts. One is with respect to the [indiscernible] more view on the gas production, and second is on the OPaL.
So first thing first, with respect to the gas field, we saw a decline by 2% during the current financial year -- during the last financial year. As you know, that we are already -- it's all mature fields. There is a decline in the range of 7% to 8%, so we have been able to control the decline to a total of around 2%.
We were envisaging an increase to be on a higher side of the gas production during the last fiscal. However, because of slight delays in the 98/2 project, we could not achieve those envisaged increased gains. However, moving forward, all our infrastructure has been in the Indian waters. Already, we have installed our CPP already, and the [ LKUP link ] water utility platform is in the process of installation.
So we hope that we will be ramping our production somewhere in the Q3 because of certain -- whether that was -- had already started. So envisaging these conditions, we hope that we should be ramping up the production in the KG from Q3 of this year. And we should be getting the full potential of our production during the Q4. So coming from this, we hope that we'll be getting incremental gas production of around 1 BCM from 98/2 during this financial year.
I hope that answers your question.
Yes, your second question -- to answer your second question -- please go ahead.
Sorry, sir, just I was asking in terms of the oil side as well, if you can give us an update on what's going on in the oil production there as well.
Similarly, both the oil and the gas sales from the 98/2, we'll be ramping our production from current 12,000 barrels to -- we hope to get our average of around 20,000 in Q3 and 45,000 barrels and [ 10 ] million cubic meter per day gas production in Q4.
Yes. Mayank, this is K.C. Ramesh. To answer your questions on OPaL, you know that ONGC had already announced an investment of around INR 18,000-odd crores for OPaL, including the backstopping support which we have already done for CCDs and the warrant that some -- balance for the warrant is there. And in addition to that, we have already invested INR 994 crores around -- in terms of equity contribution, around 49-odd percentage.
Now of course, the management had the plans to go for this investment with -- being a Maharatna company, we need to have the approval of CCA. So we had applied to the government for the same, and we are expecting the approvals to come anytime soon. So once the approval comes, the transactions would be completed.
So that's where it stands as of now. We are waiting for the approvals.
And sir, operationally, how is OPaL done at the EBITDA level or at the overall operational utilization rates level? How has been that going on, if you can just give us some idea around that?
If you've seen the PAT numbers, we had a loss of INR 4,155 crores during FY '23. Now that has got reduced to INR 3,456 crores. So a gain of around INR 700 crores at PAT level. And if you see the PBT level, PBT level number has come down from INR 3,874 crores. The loss at PBT is slightly higher at INR 4,336 crores in the current year.
But that apart, like once we address the major issues of OPaL in terms of the feedstock, in terms of getting out of the SEZ, so with these, we expect that like we can be in a much comfortable position. The CCDs are also having much higher rate of interest, as you know. So once we convert that into equity as per the plan that we have, we can definitely have good savings on account of interest. So with these 3 issues being handled, we expect that the company can come out of the present position maybe in a year or 2.
But EBITDA was positive, sir. Or is that the way to think about and it's more about the restructuring below the EBITDA line that is leading to the losses?
No. Currently, this year, the EBITDA was negative -- I think it was [indiscernible] crore negative.
[Operator Instructions] Next question comes from Nitin Tiwari from PhillipCapital.
So my question is related to the 11 discoveries that you mentioned at the beginning of the call in your opening statements. So if you can talk a little bit more about those discoveries, what is the prospect size we are talking about and like tentative time lines of basically monetization of those discoveries?
And with respect to KG 98/2, a little bit of more clarification is what I needed in terms of what is the current production. And also, what is your current HPHT production of natural gas in the entire production that we have? So that will be my first question and then I'll -- CapEx mostly, I'll ask later.
Just a second, Nitin. Yes, current production, if I start with -- current production of the KG 98/2 is around 12,000 barrels [ oil ] per day and is currently around 2.4 million cubic meter of gas. Of this, around 1.6 million cubic meter of gas is coming from 98/2, and the 0.8 million gas is coming from the other fields like HPHT, G1 and [indiscernible], [indiscernible] Vashishta.
Sorry, sir, 0.8 is from S1 and Vashishta you mentioned, right?
HPHT, G1 and [indiscernible] from Vashishta.
Okay, sir. So current total HPHT production that we have is 0.8 MMSCMD, is it?
You can say so.
Understood, sir. And sir, on the monetization of discoveries and prospect size, et cetera, the 11 discoveries that you mentioned. And like additionally, I don't know if you -- just a bookkeeping one, if you can give us the guidance for FY '25 and '26 for crude and natural gas production in terms of the breakup that you have given in the past, in terms of what is your production going to be, in terms of MoU and also what the JV production would be for both crude and natural gas.
During this last financial year, we made a discovery around 11 discoveries. We had monetized around 7. Of the 7 discoveries which have been monetized, 3 discoveries were monetized which were made during this year, and 4 discoveries were monetized, which were made in the past. And during the current financial year, we envisage to monetize our pending around 8 to 10 discoveries, we plan to monitor during this current financial year, which are pending -- which are carried forward.
So sir, what are these discoveries? These are onshore or offshore discoveries? Any idea about the prospect size? Are they going to materially add to our production, if you can provide more color on that aspect?
I think most of the discoveries which have been monetized are primarily from the onshore fields with a small [ pool ] for prospects. And 2 major discoveries which have been monetized are out of the 98/2 [ of the first oil ]. And during the later part of the year when we will be ramping our production from the 98/2, thereafter we will be monetizing a few more discoveries. 3 to 4 discoveries will be monetized from 98/2. The other discoveries will be monetized from the onshore, what we plan to do during this year.
Understood, sir. And lastly, sir, the bookkeeping question, which I asked if you can just elaborate on the guidance for production of crude oil and natural gas in terms of your production and [ daily ] production for FY '25 and '26?
Like -- for the forecast or the moving forward, we envisage to increase our production from the current 39.45 MMtoe to something around 47 MMtoe. That's increase by 20% over the next 3 years. And of the [indiscernible] around 12% increase will be contributed from oil, and 27% increase will be coming from gas.
47 MMtoe is in next 3 years, sir, you mentioned.
By FY '27.
Okay. No specific target with respect to crude and natural gas separately, sir?
For that, I guess, 19.5. Maybe we may be going up to 22. It is exactly 21.87, what we have envisaged.
And this is FY '27. Okay. And gas, sir?
Gas from 20 BCM, it may be going up to something around 25.5.
25.5 BCM, okay.
Next question comes from Sabri Hazarika from Emkay Global.
So I have a few questions. Firstly, I mean, if I look into your overall expenditure trend, so year after year, the OpEx will definitely keep increasing only. So if -- versus that if I consider your net realization because of the windfall, I think it is capped at $75 per barrel. So is there a possibility that this $75 gets increased to take care of the increase in OpEx? And are you taking it up with the ministry to consider such a change, change in the overall windfall tax formula?
Hello?
Yes, just a second, Sabri.
Yes. As far your question with respect to realization is concerned, see, even at this level of, say, $75, you might have seen that we are in a comfortable cash flow position. So the increase in OpEx is -- I mean, currently, we might have seen is around INR 18,003 crores, which is about 7.2% over the last year, on a year-on-year basis, which is not something which is very alarming.
If you see the exchange rate variation, which is happening in terms of -- you know that we have substantial exposure in terms of ForEx for payments, so that's a natural increase, which is 7.2%. It's not something which is alarming. But at the same time, the efforts are on from our side to take up this issue of the windfall tax, SAED with the government, which at our level, we have been trying, but this being a government policy, we won't be able to comment anything specific on that at this point in time.
Got it. And on this new -- I mean, this new wells and premium gas pricing, so DGH, after the February communication, has there been any update in terms of implementation of the same or anything of that, sir?
I'm [ Devend Kumar ], Chief Commercial. Government has interested DGH to look into this, and DGH has constituted a multi-company core group committee, so they are looking into it regarding the modalities of computing the well intervention pricing.
Okay. So they've grown like around 7.5% would be the decline rate. So anything -- nothing further beyond that communication, right?
No, that's right what you are saying. Considering the 7.5% [indiscernible] decline rate, thereafter, whatever the gas is produced, it will be considered for the 20% premium price.
Right, sir. But no further -- I mean it's like still under study. I mean it's not finalized or anything, no further updates beyond that, right?
Yes, there's no further update.
Yes. Current year development, there was already a development in terms of the order, which was issued on the 7.5% decline. So the nitty-gritties, we are working out on that with the DGH as, [ Devendra ], you were saying. So based on that, we are expecting a positive outcome in terms of quantifying the incremental production.
Right, sir. And just one last bookkeeping question. Your -- I mean, you mentioned in your notes account regarding this seismic survey adjustment due to which, I think, profitability and the balance sheet also had some changes. So was there any bearing on the CapEx from that? Was there some sort of like capitalization which happened because of that due to which the CapEx went up to INR 37,000 crores?
Yes. As you could see from the note, we had -- see, basically, let me explain this. This [ OC 3D ], ocean-bottom node seismic survey is basically -- we are doing in the Western Offshore, mainly from the point of view of increasing the production. And these are the -- this expenditure is mainly incurred in the area where we already have discovery and where we are currently producing with the sort of objective of increasing the production or accelerating the production.
And this expenditure, obviously, since we have decided to capitalize as against what we were doing [ is charging of ] earlier, this has added to the CapEx in the current year. We have current year's expenditure, which we have capitalized. Out of this is around INR 1,700 crores, which is included INR 37,000-odd crores, which we have shown as CapEx expenditure.
Okay. So INR 2,000 crores that you mentioned plus this INR 1,700 crores. So we have almost like INR 4,000 crores, both taxation as well as this combined, which is basically why the CapEx is inflected. Is that right?
Come again, INR 2,000 crores is with respect to what?
You mentioned this Vivad se Vishwas settlement...
Okay, the other adjustment. Yes, yes, yes. True. True. That's correct.
[Operator Instructions] Next question comes from Varatharajan Sivasankaran from Antique Stockbroking.
Sir, on this [indiscernible] tax applicability on KG basin, now we are absolutely sure if it's not applicable since you have already moved some parcels away as well?
Yes, we are quite sure we have a legal opinion on that, and we will continue to review that in the future also in conjunction with the government.
Sure. On the 20% premium in terms of applicability of quantum of [indiscernible]. According to you, do you have given some proportion of reduction by FY '26 of [indiscernible] gas production potentially get that number. If you could just [indiscernible] give us that number?
You mean to say what would be this 20% gas of the total nomination, that's what your question is?
Yes. So what percentage of production this will be applicable on, for example, in FY '26?
Okay. I think as per the latest guideline and the modalities which are under discussion with the DGH, we envisage that something around 24% to 25% of our new -- of our gas shall be eligible for the gas pricing.
So this will be for -- of FY '26 production or FY '25?
It will be -- 25% will be coming in FY '26 and thereafter.
Next question comes from Abhishek Nigam from MOSL.
Sir, first question is that there's a INR 900 crores change in stock in stand-alone earnings in this quarter. So if you can just give us some more color on that? Like is it because of crude oil changes or price changes or something else?
Yes. This year, as you know, we started producing from East Coast 98/2. So for the first time, we have had some closing stock there in the FPSO, which is added to the stock numbers.
Okay. So basically, we've not been able to sell that parcel and this is why there's a small inventory change...
Yes, not selling in the sense that, yes, it was the stock, which was there in the vessel at the end of the financial year. So the normal course of processing and selling takes its own time. So incidentally, it was there as a stock. It's not that we were not able to sell or anything.
Yes, I get your point. Okay. Fair enough. And sir, the second question is, is it possible to let us know how many offshore rigs -- jack-up rigs does ONGC have? And is there a shortage right now in India for jack-up rigs?
I think we have about around 37 offshore jack-up rigs currently in operations. And we do not any -- we do not envisage any shortfall of the risk as of now.
Of the 37, 6 are own and the rest is hired. Yes. We also have 2 floaters in addition to that.
Okay. I assume these 2 will be some semi-subassembles, am I right?
We didn't get you. Can you repeat?
Sure. So I assume the 2 floaters will be semi subs.
No 2 floaters are in operation. What is -- your question was pertaining to the jack-up rigs, so I restricted myself to jack-up. We have about 37 jack-up rigs plus 2 floaters.
Okay. 37, 3-7, right?
Yes, 37 plus 2.
[Operator Instructions] Next question comes from Kirtan Mehta from BOB Capital Markets.
Could you guide us on how do we think about the production growth at [indiscernible]. And how does its profitability could grow over the next 2 to 3 years?
I think your question is pertaining to ONGC Videsh?
Correct, sir.
Good afternoon, this is Vinod Hallan. Production this year, we achieved 7.518 LMPOE, which is against the 10.17 which we achieved in the last year. And the outlook for the next year is, it will go up to 11 in the '24-'25 and then '25-'26, we expect it to go to 11.22. So the outlook for profitability is good in the next year as we expect to actually ramp up production in -- for and then continue with good production in the South Sudan projects where we are already achieving a number of 64,000 barrels and then we also expect a favorable close of the -- this [indiscernible].
Next question comes from Vikash Jain from CLSA India.
This is mainly on depletion. So depletion seems to have jumped up in the fourth quarter. Is it something linked to reserve adjustments? And what would be the next -- going ahead for FY '25, what is likely to be able to assume similar levels of production? What is likely to be the depletion number that we look at in FY '25?
Yes. I think you're talking about the increase in depletion on an annual level of INR 1,745 crores, right?
I'm talking about the fourth quarter, sir. I'm talking about the fourth quarter, which might have adjusted the full year -- yes, I'm talking about the fourth quarter, which is about INR 5,000 crores.
Yes. Okay. Actually, to talk about depletion on a quarterly basis may not be the right thing to do because what happens is normally we update our reserve numbers twice a year, once -- in half of the first half and again annually. So whatever additions that, which comes during the year gets repeated on the base of the annual reserve numbers.
But having said that, the depletion number generally increase on account of the new capitalization. So current year, we had capitalized around INR 16,000 crores additionally in the assets and that had resulted into increase in depletion by INR 1,250 crores. And also, there is a change in the reserve to production ratio, which contributed to around INR 370 crores.
And also -- okay, I think you talked only about depletion. You are not into depreciation, so I won't talk about depreciation. The increase in depletion in the -- quarter-on-quarter, there is also -- the main increase is in Western Offshore by INR 1,009 crores due to additions of wells and facilities and then change in depletion rate around INR 115 crores and the change in carrying value of the assets by INR 141 crores.
One of the factors which has also contributed to this is that, as you know, that we have capitalized the [indiscernible] survey cost this year. So on account of that about INR 46 crores has got added. And in 98/2 block, depletion around INR 620 crores due to increase in the oil and gas asset capitalized. So these are the major reasons for increase in quarter-to-quarter depletion.
And on an annual basis, say, we were at about 14,200 in FY '23, that's up to 15,800 now. FY '25 after this 4Q change number, how is that likely looking like? I mean, what is it that we should look at? Because I mean, INR 5,000 crore into 4 is that what we are looking at or that is because that INR 5,000 crores has an adjustment for earlier quarters also, it is not that high a number? What should be the depletion that we look at, assuming similar production levels for FY '25?
Yes, It will not be INR 5,000 crore into 12, for sure. It is 15,861 is the number that we have for the current year. So you can probably add further depletion because of the full production, which comes from 98/2. So there could be some addition coming in from there. But other than that, we expect the depletion to be at the same level as far as the other areas are concerned. So the current level, plus some addition coming from 98/2.
Okay. That's where the production that comes in, yes. And on -- so I'm a bit confused on this Vivad se Vishwas thing. You said that OpEx, which is other expenditure in income statement is higher because of some one-offs linked to Vivad se Vishwas, so should I say that there is -- some of it is in OpEx, some of it in CapEx, both and -- so basically...
Absolutely. Yes.
So how much of the OpEx jump that we see in fourth quarter can be because of some of these one-off numbers? Can you just remind us again, please?
Only on account of Vivad se Vishwas, you mean?
Or any other, which you believe are largely one-off in nature.
See, on account of Vivad se Vishwas mainly because of the interest that we have to pay. On 2 cases, we had to pay interest of almost around maybe INR 350-odd crores, INR 350 crores, INR 400 crores. That is one reason, which is it has gone to P&L. And total -- in total, Vivad se Vishwas would be in the range of around what has gone into the OpEx is...
In fourth quarter, sir.
Yes, the entire Vivad se Vishwas, in fact, has been settled in fourth quarter only and it is around INR 700 crores to INR 800 crores is the hit that has gone to the P&L in Q4.
Okay. Okay. And any other element, which is -- which you can say is more one-off in nature or not really?
Just hold on for a second. Yes, in addition to the Vivad se Vishwas, we also had a VAT amnesty scheme that has also added by about INR 160-odd crores to the OpEx. So mainly Vivad se Vishwas and VAT amnesty, this is the one-off cases.
So INR 750 crores for Vivad se Vishwas and INR 160 crores for the other one, right?
Yes. So year-on-year increase is around INR 1,800 crores, right? So of which -- these are the 2 cases, which are one-off cases.
Okay. And lastly on this -- firstly, on KG 98/2, you said 3Q is when you see the oil picking up from 12 to 30 and then in 4Q going to that 45 mark. And for gas, you said similarly 3Q and 4Q is when you see the pickup, right?
Right. 12 to [indiscernible] in Q3.
12 to 20 and then 20 to 45?
Right, right.
And gas, similarly, 3Q and 4Q.
That's right.
Okay. And last thing that I wanted to ask was on this 7.5 depletion rate that you said is under discussion, which means that if, say, in FY '25 and the starting year will be FY '24, right? So whatever is -- if 100 is your gas production in FY '25, if it remains at 100, so 7.5 will be getting a higher gas price and remaining 92.5 will get the ceiling of 6.5-or-so. Is that how I should think about it?
I think your understanding is correct.
And when you say the higher gas price, in your understanding, there is no ceiling applicable over there?
20% premium on the Indian crude basket price.
Which is 12% slope. Instead of 10%, 12% slope without any [ ceiling ].
Correct.
And this windfall tax thing not being applicable for KG 98/2 is not -- I mean, irrespective of the fact that your production is lower than FY '22 level, which is how it was decided on all of KG 98/2 oil production there in your understanding, there will be no windfall tax. That's the legal opinion that you have taken, right?
Yes. That's right.
[Operator Instructions] Next question comes from [indiscernible] from Avendus Spark.
First question is on the gas production outlook. Just want to understand, you said 20 going to 25 in a 3-year time frame. If you could just help us next -- I mean, FY '25-'26, how would this ramp-up would be? That should be it.
Yes. We said we will be producing around 10 million cubic meter gas per day from 98/2, that gives me 3.65 BCM of which out of the 10,000, we are currently producing only 2.4, that means 75% increment of the gas will be coming from 98/2 at 3.65 75% is around 2.8 and then we expect around 1.5 BCM of gas from [ upside ] project. So that is our major contributor -- in addition to that, what I told about the standard gas, which will be adding another 0.3 million to 0.5 million. 0.3 million [indiscernible] with this Urja-Ganga pipeline and Indradhanush and the other areas where we are working upon. So this is a broad breakup of the major contributors.
If I understand right. So of the 5 BCM incremental expectation, roughly 1.3, 1.4 will come from new projects apart from KG Basin, 0.3 from standard gas and the rest all from KG 98/2.
[indiscernible] 98/2 and the standard gas that comes to around 5 [indiscernible].
Okay, sir. And this ramp-up between 20 to 25, this will be -- most of this will be seen in FY '26? Or how should we look at it?
Partly, it will be ramping up with something around 5% ramping up in FY '25, 10% in '26 and 10% in '27. So overall ramping up will be around 27%.
Sir, also the CapEx number that we are looking at, which is INR 33,000 crore to INR 35,000 crores, this does not include any equity infusion. Just trying to understand the quantum that we need to infuse into OPaL and whether that number is included in this? And also, what are the time frame that we are looking at for that equity?
The actual number so far is not included definitely. So...
Even the INR 33,000 crores to INR 35,000 crores bit range I had given you, OPaL is not included in it.
Yes. So just wanted to understand how much we need to infuse? And what is the time frame within which we'll be [indiscernible].
So we -- as we said earlier, we already have some CCDs in place and some warrants in place. So in addition to that, I think what we are looking at is around INR 10,500 crores in addition to the CCDs and the warrants -- I mean, CCD we already had backstop, so we'll have to take that as well. So total INR 18,500-odd crores, yes.
So this will be done over a couple of years. Is this the right way to...
So that modality has to be worked because we are awaiting the clearance from the ministry.
Next question comes from Nitesh Dutt from Burman Capital.
Sir, I have a couple of questions on the natural gas front. First one is the decline in the current year FY '24, was all of it because of the natural decline? Or were there any production stoppages, et cetera, in our existing sales, which will get taken care of later on?
I think it's a natural decline only.
All right. And sir, second is increase from 20 to 25 over the next 3 years, can you just give an idea on the pricing as well? Or will most of it be priced at 6.5 per MMBtu pricing slab or some of it is HPHT pricing slab? I think you had mentioned, but I missed it.
This premium price, what we are talking about is only through the well intervention or the new debt from the nomination field. So any field coming under the [indiscernible] are not covered or even the HPHT it's not covered for the premium gas price. They are already getting the higher price.
So sir, you're saying it's not within the ambit of HPHT?
It does not include the HPHT.
Got it. So it will be priced as per the 10% slope, is it?
HPHT gas? No, no, no. HPHT is eligible is $9.87. That is currently eligible for $9.87 per annum BTU.
Next question comes from [indiscernible] from [ Nuvama Wealth ].
So my question is regarding the formation of the new subsidiary that was announced in January. So just proposed now that ONGC is going to have a ONGC Green Energy Limited, if I'm not wrong, as a subsidy -- ONGC Green Limited. And we are planning to have the businesses of green hydrogen and renewable energy in that subsidiary. So out of the INR 33,000 crores to INR 35,000 crores CapEx that is expected in the next year -- are we proposing to have any equity infusion or CapEx into that business in the next year? Or is it going to be after 2 to 3 years from now?
Yes. Just a second. Hold on for a second.See, this OGL which we have formed recently is a company which directionally will be going towards working in the renewable and green -- and it's just the beginning. And we would be infusing the capital based on what sort of projects which we're going to undertake mostly in the field of solar or wind or to some extent, PSP also.
So since it's just a beginning, the current CapEx of whatever is the figure which we talked about, would not be including that because right now, we're finding all the opportunities. And based on the fit with the business, we would be taking a call at that stage.
I understand, sir. So sir, India's target of 5 metric tonne per annum of green hydrogen by 2030, I understand that we, as a business, want to be forming a large part of that -- but I read that ONGC is targeting 0.18 metric tonne per annum of green hydrogen by 2030. So could you just give an idea as to when are we going to at least start with that capacity, sir?
The first focus is right now on the solar and wind and others. And definitely, hydrogen is on our radar. We definitely would be working on that. As I said, right now, we are looking at the right opportunity. So we'll be looking into that also.
The last question for the day comes from [ Vipul Kumar Shah ] from [ Sumangal ] Investments.
Sir, so what is the OVL production this year? And you -- would you repeat the figure where we see it going in the next 2 years?
Yes. Just a second. The current year OVL production is at 10.518 MLToE, and the outlook for next year, '24-'25 is 11, '25-'26 is 11.22 MLToE.
Now I hand over the floor to Mr. K.C. Ramesh, CFO, for closing comments.
Yes. Thank you all for being part of this earnings call this year. Normally, we do have a call at Mumbai. But this year, we decided to have a call from Delhi and was very nice interacting with all of you. Hope we could answer all your queries to your satisfaction. We look forward to seeing you and having more interactions in the future. And once again, thank you all. Thank you very much.
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.