Journey of ONGC

Oil and Natural Gas Corporation (ONGC) is the largest crude oil and natural gas producer in India. The central public sector company originated as on August 14, 1956, by the Indian government. The company had been established with the objective of increasing India’s crude oil production by engaging primarily in oil exploration operations. Of the 9 producing basins of India, ONGC has discovered 8. The company found crude oil reserves in 1958 at Gujarat, 1963 at Assam, 1967 at Rajasthan, 1974 at Mumbai, 1980 at Krishna Godavari, 1985 at Cauvery, 2019 at Bengal and 2022 at Vindhyan. The company currently produces ~71% of the total crude oil in India and ~84% of the natural gas. It also happens to be the most profitable public sector undertaking in India. In 2010, it was offered the Maharatna status by the government. During the 2022 Russia-Ukraine conflict, the company faced difficulties in transporting oil and natural gas despite having stakes in Russian oil and gas fields. It saw a dip in its net profit in the first half of FY 2023, which it has eventually recovered from.

Business Segments

ONGC primarily engages in drilling and operating oil wells. The company has the following lines of business in terms of products:

1. Crude Oil- It accounted for ~70% of the revenues in FY 2021. In the period between FY 2015-16 and FY 2022-23, the revenue coming from crude oil has nearly doubled for the organization.
2. Natural Gas- This contributed ~17% of the FY 2021 revenue. The total revenue coming from natural gas has nearly doubled in the period between FY 2018-19 and FY 2022-23.

The remaining revenue came from other value-added products. The list of value-added products offered by ONGC includes products such as LPG, Naphtha, Ethane – Propane, Butane, aviation turbine fuel and superior kerosene oil, among others. Geographically, 93.5% of revenue comes from India, while the remaining 6.5% comes from International Trade. The foreign projects coming under the purview of ONGC Videsh Ltd. include projects in Myanmar, Colombia, Russia, Venezuela, Azerbaijan, Bangladesh, Vietnam, etc. In order to handle the extensive global operations in multiple countries as well as functions, ONGC has a number of subsidiaries as well as joint ventures. Subsidiaries include:

1. ONGC Videsh Ltd helps in the international operations.
2. Hindustan Petroleum Company Ltd (HPCL) helps in the oil marketing and distribution. The company is a Maharatna itself and owns two major oil refineries. HPCL also administers the largest lubricant factory in India, producing lubes, speciality chemicals and greases.
3. MRPL (Mangalore Refinery and Petrochemicals Limited) for refinery activities.
4. PMHBL (Petronet MHB Limited) for the transportation of petroleum products from the Mangalore refinery.

Corporate Actions

Stock Split ONGC split the face value of its shares once from ₹10 to ₹5, quoting on an ex-split basis from February 8, 2011. Bonus Share Oil and Natural Gas Corporation had announced a bonus share issue in the ratio of 1:2, quoting ex-bonus from December 15, 2016. Earlier, it had announced bonus shares at 1:1 and 1:2 in 2011 and 2006, respectively. Buyback of Shares ONGC performed a buyback of shares with ex-date on January 3, 2019. ONGC has not announced any rights issues so far.

Financial Highlights

1. In the years between FY 2020-21 and FY 2022-23, the organization has more than doubled its total sales revenue.
2. In the same period, the organization has also paid out dividends with the dividend payout ratio at 28%, 29%, and 40% chronologically.
3. However, its profits have been highly volatile.
4. Similarly, its cash flow has also been volatile in the past decade, with frequent negative yearly cash flows.