group 7 corporate hero

8/3/2019 Group 7 Corporate Hero

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Oil &Natural

Gas

CorporatiP a g e | 1


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onLimited

(ONGC)A Corporate Hero

Presented by:

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Group 7

ID Name EmailContactNo.

001/1

AbhinavSharma

[email protected]

9199395249

016/1 Birma Ram

[email protected]

7250239925

017/1

ChandanGupta

[email protected]

9162543021

020/

1

Ekansh

Kumar

[email protected]

hi.ac.in

9570058

169

Contents

S.

No.Topic

Pag

e

1. Vision & Mission statements 3

2. Introduction 4

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mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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3. Historical Background 5

4. Indian Oil & Gas Industry 13

5. SWOT Analysis 15

6. Financial Analysis 16

7. References 18

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1. Vision & Mission Statements

Vision

To be a global leader in integrated energy business through

sustainable growth, knowledge excellence and exemplary governance

practices.

Mission

Stay dedicated to excellence by leveraging competitive

advantages in R&D and technology with involved people.

Imbibe high standards of business ethics and organizational

values.

Abide to commitment to safety, health and environment to

enrich quality of community life.

Foster a culture of trust, openness and mutual concern to make

working a stimulating and challenging experience for our people.

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Strive for customer delight through quality products and

services.

Focus on domestic and international oil and gas exploration and

production business opportunities.

Provide value linkages in other sectors of energy business.

Create growth opportunities and maximize shareholder value.

Retain dominant position in Indian petroleum sector and

enhance India's energy availability.

1. Introduction

In its fifty five years of existence, Oil and Natural Gas Corporation

Limited (ONGC) continues to be the highest profit making corporation

in India. (Source: BSE Stock Reach). At the time of Independence, the

entire Indias oil production was just 250,000 tonnes per annum from

the International Oil companies in Assam. In 2010, ONGC itself has

produced 24.67 Million tonnes which is about 77% of India's crude oil

production (Source: ONGC Annual report). Apart from Oil, ONGC has

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also been pivotal in the gas production sector. In 2010, they produced

23.11 Million tonnes of Gas, which accounted for about 81% of India's

natural gas production.

Thus, ONGC has been playing an important role to meet the energy

requirements of the country and meet the rapidly growing demand for

petroleum products in the country. A lot of initiatives and planned

measures have helped both India and ONGC reach this stage. Let us

first discuss the developments in the sector over the past before

discussing the strategic intent in the context of ONGCs strengths and

weaknesses.

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2. Historical Background

India is the sixth largest consumer of oil (Source: Energy Information

Administration Country Analysis Briefs). There is a huge demand-

supply gap in oil and gas in India. The country imports more than 70%

of its crude oil requirement.

Prior to independence, there were two companies in India involved in

the exploration of oil - the Assam Oil Company in the North-Eastern

region and the Attock Oil Company in the North-Western region. Both

companies had meager oil exploration outputs as major parts of India

were deemed unfit for exploration of oil and gas resources.

After independence, the Government of India realized the importance

of developing the oil and gas sector to achieve rapid industrialization.

Under Industrial Policy Resolution (1954), the Government of India

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categorized Petroleum as a core industrial sector. In the 1950s, private

oil companies carried out exploration of hydrocarbon resources in the

country. However, a large portion of offshore regions remained largely

unexplored. Therefore, the Government of India decided to explore oil

and natural gas resources in various regions of the country.

This resulted in the formation of the Oil and Natural Gas Directorate at

the end of 1955, as a subordinate office under the then Ministry of

Natural Resources and Scientific Research. The department was

constituted with a team of geoscientists from the Geological Survey of

India.

However, soon after the Directorate's formation, it became evident

that it would not be possible for the new body to function efficiently

due to limited financial and administrative powers. In August 1956, the

Directorate was raised to the status of a Commission with enhanced

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powers. However, it continued to be under Government of India

control.

In October 1959, the body received further elevation, both in status

and powers, with the Commission being converted into a statutory

body by an act of Parliament. This act came to be known as the ONGC

Act in 1959. According to the act, Oil and Natural Gas Commission's

main functions were, "to plan, promote, organize and implement programs

for the development of Petroleum Resources and the production and sale of

petroleum and petroleum products produced by it, and to perform such other

functions as the Central Government may, from time to time, assign to it".

With the discovery of Mumbai High (formerly Bombay High) in 1974,

establishment of the new oil province in Cambay basin (Gujarat) along

with various subsequent discoveries of huge oil and gas fields in both

western and north-eastern regions of the country, ONGC has been

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pivotal in changing the oil scenario of India. One of the biggest

achievements of ONGC is that it became self reliant at a very early

stage through the discovery of 5 billion tonnes of hydrocarbons. In

1992, ONGC undertook exploitation of CBM (Coal Bed Methane: A form

of natural gas extracted from coal beds) potential in Damodar valley.

As a consequence of the liberalized economic policy, adopted by the

Government of India in July 1991, sought to deregulate and de-license

the core sectors (including petroleum sector), ONGC was re-organized

as a limited Company under the Company's Act, 1956 in February

1994. After conversion of business of the erstwhile Oil & Natural Gas

Commission to that of Oil and Natural Gas Corporation Ltd, two

percent of shares through competitive bidding were disinvested.

Further expansion of equity was done by two percent share offering to

ONGC employees

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To strengthen reserves accretion portfolio and open up areas of future

exploration, ONGC has undertaken an Accelerated Program of

Exploration (APEX) with an outlay of Rs 3958 Crores. The main

objectives of APEX were enhancement in seismic surveys,

enhancement in exploratory drilling, national seismic program,

exploration in frontier areas and acquisition of foreign acreage.

ONGC has assimilated various technologies in the field of

hydrocarbons explorations and exploitation. The Company owns

Dornier-228 aircraft, Chetak helicopter, offshore supply vessels and

geo-technical survey vessel. It has 2 central workshops located at

Baroda & Sibsagar, 7 project workshops and 11 auto workshops

located at various project sites employing multifarious equipments and

machinery. It has also state-of-the-art communication systems both

terrestrial and satellite based for meeting operational & MIS

requirements of onshore & offshore.

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The Company embarked upon exploration in the deep sea basin on the

East and West Coast of the country. The interpretation of Seismic data

acquired in the deep water offshore areas led to identification of a

number of prospects in Krishna-Godavari, Cauvery, Kerala-Konkan &

Kutch basins.

In 1996, ONGC established a subsidiary ONGC Videsh Limited (OVL),

completely owned by ONGC that looks for exploration opportunities in

other parts of the world. Through OVL, ONGC has taken up joint

venture projects in the fields of exploration, development and

production in seven countries: the United States, Russia, Vietnam,

Yemen, Tunisia, Egypt and Kazakshtan.

By 1997, The Institute of Oil and Gas Production Technology (IOGPT),

a premier research and development institute of ONGC, became ISO

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9001 certified, for design development and consultancy including lab

study and training for hydrocarbon production, processing and

refining.

ONGC holds 40% participating interest in three joint venture contracts

for development of Ravva, Panna-Mukta and Mid & South Tapti. It

joined hands with Royal Dutch Shell group to help revive production at

the Neelam oil field, with PGS Ocean Bottom Seismic for a 3-D ocean

bottom cable technique seismic survey over the Mumbai High field and

with Indian Petrochemicals Corporation Ltd (IPCL) for the supply of

nearly 570,000 tonnes per year of feedstock for its 400,000 ton

ethylene cracker at Nagothane.

The government, in order to increase exploration activity, approved

the New Exploration Licensing Policy (NELP) in March 1997 to ensure

level playing field in the upstream sector between private and public

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sector companies in all fiscal, financial and contractual matters. This

ensured there was no mandatory state participation through ONGC nor

there was any carried interest of the government. However, ONGC has

bagged 120 of the 238 Blocks (more than 50%) awarded in the 8

rounds of bidding, under the New Exploration Licensing Policy (NELP)

of the Indian Government.

Another big leap was taken in March 1999, when ONGC, Indian Oil

Corporation (IOC) and GAIL (Gas Authority of India Ltd. the only gas

marketing company) agreed to have cross holding in each others

stock. Consequently the Government sold off 10 per cent of its share

holding in ONGC to IOC and 2.5 per cent to GAIL. With this, the

Government holding in ONGC came down to 84.11 per cent. The

Government also gave its approval for import of LNG & setting up

appropriate LNG terminals to meet the demand for gas in the country.

More than three hundred forty million shares were issued to the

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President of India, more than a billion equity shares were issued as

bonus shares and about six to seven million equity shares were

disinvested.

A major fire broke out at the gas well in the western offshore, about 35

km from Bombay High on 12th March 1999. It was the first ever fire at a

gas producing well in India. ONGC pumped in more than Rs 8,500

Crores to redevelop the field from 2001.

In 2002-03 ONGC took over Mangalore Refinery and Petrochemicals

Limited (MRPL) from the A. V. Birla Group. With this takeover, ONGC

diversified into the downstream sector and announced its entry into

the retailing business. It took authorization from the Government to

retail petrol & diesel, entered into contract with GAIL for supply

agreements which included both customer end and supply end

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contracts and with IOCL for supply of crude oil. Hindustan Petroleum

Corporation Ltd. (HPCL) also tied-up with ONGC to purchase LPG.

It acquired 20% in gas project of Daewoo International in South Korea

and dethroned Hindustan Lever Ltd. (HLL) to become India's largest

company by market capitalization. It even became a member of

Federation of Indian Chamber of Commerce & Industry (FICCI).

Meanwhile, OVL purchased 25% stake in Greater Nile project in Sudan

from the Talisman Energy Inc of Canada with an oil reserve of 150

million metric tonnes for USD 771 Million and shipped Sudan oil to

India, the first ever shipment of Indian crude from a foreign field. It

even bought Austria-based OMV Aktiengesellschaft's shares in two

onshore exploration blocks in Sudan for a consideration of USD 115

million.

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3. Indian Oil & Gas Industry

As part of the effort to reduce oil imports and promote the oil

production and oil exploration activities, the Ministry of Petroleum and

Natural Gas created the New Exploration License Policy (NELP) in 2000.

It was a part of the oil reforms on India, allowing 100% FDI in oil and

natural gas projects.

However, most of the oil industry, both upstream as well as

downstream is dominated by the state-owned entities. Although, the

share of the private players has increased in the recent past, the

foreign players are relatively very few.

There are two stages in the energy value chain, upstream (exploration

and production) and downstream (refining and marketing). After

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extracting crude oil from the reserves, it is processed to yield various

petroleum products, which are then marketed.

ONGC and Oil India dominate the upstream segment contributing 85%

to India's total oil production. In the downstream segment, major

players include IOC, HPCL, BPCL and Reliance. Independent refineries

have now become subsidiaries of these bigger players. There are a

total of 20 refineries in the country comprising 17 in the public sector

and 3 in the private sector with a combined refining capacity of 178

Million tonnes per year. IOC dominates the refining capacity with a

total share of nearly 27% of the current refining capacity.

ONGC is the major producer of natural gas accounting for 60% of

domestic production. RIL's KG basin fields have also become a major

contributor. GAIL is the monopoly player in the transmission and

distribution of natural gas, accounting for about 79% of the supplies.

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However, the country still witnesses shortage in supply of natural gas.

In spite of huge discoveries made by RIL in KG basin, the demand

growth will outperform the supply growth for some time to come

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4. SWOT Analysis

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5. Financial Analysis

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

PBIDT to Turnover

(%)

54.2

0

54.1

0

53.8

0

55.0

0

52.2

0

57.4

0

51.9

0

51.2

0

49.1

0

60.6

0

PBDT to Turnover

(%)

56.1

0

57.3

0

57.2

0

58.2

0

54.8

0

60.0

0

55.4

0

56.9

0

55.3

0

64.0

0

Profit Margin (%) 21.5

0

26.0

0

29.8

0

26.3

0

27.5

0

29.2

0

26.5

0

27.1

0

24.8

0

27.1

0

Contribution to

Exchequer to

Turnover (%)

45.9

0

45.6

0

54.0

0

51.2

0

48.3

0

47.3

0

48.5

0

48.8

0

43.1

0

45.3

0

ROCE (PBIDT to

Capital Employed)

(%)

42.4

0

39.2

0

54.0

0

45.8

0

58.8

0

57.5

0

56.7

0

52.0

0

49.9

0

50.9

0

Net Profit to Equity

(%)

17.3

0

21.0

0

29.6

0

21.7

0

28.0

0

26.9

0

25.5

0

23.9

0

20.7

0

19.4

0

Current Ratio 2.89 2.62 2.45 2.79 2.62 3.08 2.77 2.47 2.26 2.38

Debt Equity Ratio

(%)

14.0

00

10.0

00

1.00

0

1.00

0

0.30

0

0.20

0

0.10

0

0.10

0

0.03

0

0.00

6

Debtors Turnover 26.0 34.0 41.0 26.0 29.0 27.0 17.0 26.0 23.0 19.0

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Ratio(Days) 0 0 0 0 0 0 0 0 0 0

Earnings Per Share

(Rs.)

36.7

0

43.5

0

73.8

0

60.8

0

91.0

5

101.

2

73.1

4

78.0

9

75.4

0

78.3

9

Dividend (%) 110.0

140.0

300.0

240.0

400.0

450.0

310.0

320.0

320.0

330.0

Book Value Per

Share(Rs.)

211.

0

207.

0

250.

0

281.

0

325.

0

376.

0

287.

0

327.

0

365.

0

404.

0

Profit & Loss Account

2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

REVENUES

Sales

Crude Oil445,0

53397,7

18386,8

05372,0

90317,3

57311,8

24222,1

24244,1

31137,1

15141,5

38

Natural Gas73,79

775,52

871,78

072,11

366,70

153,20

652,03

949,98

649,44

649,75

6

LPG21,92

422,75

220,16

814,86

616,29

312,06

616,35

219,08

711,47

314,16

1

NGL/AromaticRich Naphtha

47,137

48,406

43,849

37,097

35,679

29,260

22,538

22,035

18,782

18,554

Ethane/Propane10,24

9 9,890 9,291 9,095 7,401 5,705 4,779 5,837 4,082 4,359SuperiorKerosene Oil 3,256

16,701

10,775

15,754

10,605

16,896 2,658 3,188 1,731 1,616

HSD 15661,91

048,62

142,03

723,40

329,27

7 85 80 0 0

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Motor Spirit 2711,06

2 9,159 4,530 3,797 6,846 0 0 0 0

Others 463 1,526 925 634 617 1,434 1,060 995 766 522Price RevisionArrears 0 0 0 11 156 584 3,461 1,568 5,017 1,355

Sub-Total 602,062 639,493 601,373 569,037 482,009 467,098 325,096 346,907 228,412 231,861PipelineRevenue 1,078 2,329 1,522 82 15 23 24 478 3,966 4,612

Other Receipts15,51

2 7,86111,39

021,65

310,25

7 5,034 4,262 6,276 6,194 5,784Accretion/(Decretion) instock 1,180 811 1,141 -197 2,116 299 -112 211 2 447

Total Incomefrom Operations

619,832

650,494

615,426

590,575

494,397

472,454

329,270

353,872

238,574

242,704

COST &EXPENSESOperating,

Selling &General

(a) Royalties54,83

244,93

460,70

753,42

846,18

137,91

128,45

130,00

225,14

223,02

4(b) Cess/ExciseDuty

56,752

59,174

61,106

62,024

44,302

46,498

46,302

46,994

25,660

23,833

(c) NaturalCalamityContingentDuty-Crude Oil 1,062 1,081 1,127 1,149 1,081 1,138 1,117 98 0 0

(d) Sales Tax 2,990 6,910 772 1,380 5,72714,58

011,05

012,56

1 7,713 7,439(e) EducationCess 1,719 1,784 1,861 1,303

(f) Octroi & PortTrust Charges 4,486 4,130 4,195 3,232 2,447 3,131 2,236 2,679 1,227 1,219

Sub-total (a to f)121,8

41118,0

13129,7

68122,5

1699,73

8103,2

5889,15

692,33

459,74

255,51

5

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PipelineOperations(ExcludingDepreciation) 7,975 6,963 7,318 6,460 5,907 8,982 5,717 5,452 4,951 4,965Other OperatingCosts

118,322

116,849

99,505

95,556

70,855

62,415

53,131

65,403

44,133

46,629

Exchange Loss-

4,033 3,819-

1,070 177 -172 2 36 191 469 1,269

Purchases 13985,16

665,11

559,40

134,33

851,01

3 0 0 0 0

Recouped Costs

(a) Depletion45,30

242,14

836,77

633,84

929,70

224,85

123,32

317,49

715,63

815,75

9

(b) Depreciation12,31

214,49

114,06

016,24

923,75

9 5,437 6,057 7,599 8,28610,60

2

(c) Amortisation89,40

767,32

047,58

043,16

731,43

731,58

826,33

916,18

114,22

818,17

2

(d) Impairment -433-

3,110 -437 1,729 -325 140 162 162 247 2,861Sub-Total (a tod)

146,588

120,849

97,979

94,994

84,573

62,016

55,881

41,439

38,399

47,394

Total Cost &Expenses

390,832

451,659

398,615

379,104

295,239

287,686

203,921

204,819

147,694

155,772

OperatingIncome BeforeInterest & Tax

229,000

198,835

216,811

211,471

199,158

184,768

125,349

149,053

90,880

86,932

Interest

Payments 686 1,190 590 215 470 377 468 1,132 2,469 3,984

Receipts21,52

541,50

436,12

520,69

513,27

812,26

411,20

913,31

710,14

1 8,620

Net

-20,83

9

-40,31

4

-35,53

5

-20,48

0

-12,80

8

-11,88

7

-10,74

1

-12,18

5-

7,672-

4,636

Profit BeforeTax& ExtraordinaryItems

249,839

239,149

252,346

231,951

211,966

196,655

136,090

161,238

98,552

91,568

ExtraOrdinaryItems 0 658 0 4,751 6,405 0 0 0 0 0

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Profit BeforeTax

249,839

238,491

252,346

227,200

218,371

196,655

136,090

161,238

98,552

91,568

Corporate Tax(Net)

82,163

78,544

85,330

80,273

74,063

66,825

49,446

55,945

36,573

39,280

Net Profit167,6

76159,9

47167,0

16146,9

27144,3

08129,8

3086,64

4105,2

9361,97

952,28

8

Dividend70,58

368,44

468,44

466,30

564,16

757,03

734,22

242,77

819,96

315,68

5

Tax on Dividend11,61

611,63

211,63

210,12

5 9,000 7,763 4,385 2,375 0 1,600RetainedEarnings ForThe Year

85,477

79,871

86,940

70,497

71,141

65,030

48,037

60,140

42,016

35,003

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1. Revenue which was rising earlier has declined in 2010 due to

termination of MRPL sales on expiration of the corresponding

Memorandum of Understanding.

2. ONGC posted a net profit of Rs. 167.68 billion despite volatile oil

markets and crude prices.

3. The company has practically zero corporate debt since it is just

0.006% of the equity capital

4. Even with falling margin, the firm contributed over Rs. 281 billion to

the exchequer.

5. ONGC enjoys a very high profit margin and is thus less prone to

financial risk.

6. With the new government regulations in place, the debtors have

reduced and ONGC have invested the freed up capital (See the

increase in investments)

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7. Companys working capital has also increased in proportion to the

increase in sales and the ratio of working capital to sales has stayed

at a healthy level.

8. Company has been consistently investing fixed assets also which

ensures a steady cash cycle in future too.

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1. References

1. http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach

.aspx?scripcode=500312

2. http://www.ongcindia.com/download/AnnualReports/Annual_Repor

t_200910.pdf

3. http://www.eia.doe.gov/cabs/india/Full.html

4. http://www.ongcindia.com/press_release1_new.asp?

fold=press&file=press385.txt

5. http://indiaearnings.moneycontrol.com/sub_india/reports.php?

sc_did=ONG&type=directorsreport

6. http://www.ongcindia.com/profile_new.asp

7. http://www.ongcindia.com/history.asp

8. http://www.equitymaster.com/research-it/sector-info/energy/

9. http://www.ongcindia.com/vision.asp

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http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=500312http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=500312http://www.ongcindia.com/download/AnnualReports/Annual_Report_200910.pdfhttp://www.ongcindia.com/download/AnnualReports/Annual_Report_200910.pdfhttp://www.eia.doe.gov/cabs/india/Full.htmlhttp://www.eia.doe.gov/cabs/india/Full.htmlhttp://www.ongcindia.com/press_release1_new.asp?fold=press&file=press385.txthttp://www.ongcindia.com/press_release1_new.asp?fold=press&file=press385.txthttp://indiaearnings.moneycontrol.com/sub_india/reports.php?sc_did=ONG&type=directorsreporthttp://indiaearnings.moneycontrol.com/sub_india/reports.php?sc_did=ONG&type=directorsreporthttp://www.ongcindia.com/profile_new.asphttp://www.ongcindia.com/history.asphttp://www.equitymaster.com/research-it/sector-info/energy/http://www.ongcindia.com/vision.asphttp://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=500312http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=500312http://www.ongcindia.com/download/AnnualReports/Annual_Report_200910.pdfhttp://www.ongcindia.com/download/AnnualReports/Annual_Report_200910.pdfhttp://www.eia.doe.gov/cabs/india/Full.htmlhttp://www.ongcindia.com/press_release1_new.asp?fold=press&file=press385.txthttp://www.ongcindia.com/press_release1_new.asp?fold=press&file=press385.txthttp://indiaearnings.moneycontrol.com/sub_india/reports.php?sc_did=ONG&type=directorsreporthttp://indiaearnings.moneycontrol.com/sub_india/reports.php?sc_did=ONG&type=directorsreporthttp://www.ongcindia.com/profile_new.asphttp://www.ongcindia.com/history.asphttp://www.equitymaster.com/research-it/sector-info/energy/http://www.ongcindia.com/vision.asp


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10. http://www.ongcindia.com/download/AnnualReports/Annual_report

02-03-final_s_rev2.pdf

11. http://www.ongcindia.com/download/AnnualReports/ar_04-

05/AR_1-54.pdf

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