Shares of Oil and Natural Gas Corporation Ltd (ONGC) experienced a significant drop of over 4% in Wednesday's trading session, closing at Rs 275.50 on the BSE. This decline occurred despite the state-run oil refiner reporting a robust 53% year-on-year surge in its consolidated net profit for the fourth quarter, reaching Rs 13,678 crore.
Profit Surge Overshadowed by Analyst Estimates
The seemingly contradictory market reaction stems from the company's Q4 profit missing analyst estimates. According to MOFSL, the adjusted profit shortfall was primarily driven by substantial dry-well write-offs. Additionally, volume growth for the quarter disappointed investors.
MOFSL highlighted that crude oil production fell by 6% year-on-year, while natural gas production also declined by 3% year-on-year. These production shortfalls, coupled with the higher-than-anticipated write-offs, contributed to the negative investor sentiment despite the strong top-line profit figures.
Operational Challenges and Financial Details
ONGC's gross revenue for the quarter saw a modest increase of 3.6%, climbing to Rs 1,73,805 crore. However, the company faced several operational hurdles. Geological complexities led to production issues from its 98/2 Field in Eastern Offshore.
Furthermore, the ongoing crisis in West Asia impacted critical infrastructure projects, including pipeline replacement and the DUDP project, affecting oil and gas production from the Western Offshore. Temporary disruptions also occurred due to hook-up operations for pipelines, compressors, and turbines in existing wells and surface facilities in the Western offshore region.
The company also booked additional impairment charges at its Mozambique and Sakhalin assets during Q4 FY26. MOFSL noted that dry well write-offs and other expenses exceeded their estimates, although finance costs and other income remained in line with projections.
ONGC's crude oil and gas sales volumes were 4% and 5% below MOFSL's estimates of 4.6 million metric tons and 3.8 billion cubic meters, respectively. The reported oil realization stood at $78.3 per barrel. For the full fiscal year 2026, revenue from new well gas amounted to Rs 6,678 crore, contributing an additional Rs 1,223 crore compared to the APM gas price. New Well Gas now accounts for over 21% of the total revenue from ONGC's nomination gas portfolio.