E&P capex Rs.280bn-Rs.300bn
ONGC’s annual capex will be Rs.360 billion-Rs.400 billion over fiscals 2021-2022, a scale-back from earlier expectation given weaker profitability, said S&P Global Ratings on 21 May 2021.
The company will likely continue to have exploration and production (E&P) capex of Rs.280 billion–Rs.300 billion to maintain its production volumes.
“For the refineries, we believe ONGC will curtail part of its capex at its 51.1%-owned subsidiary Hindustan Petroleum Corp Ltd (HPCL) in fiscal 2021,” said S&P. This is especially for HPCL’s greenfield Barmer refinery project in the Rajasthan.
Meanwhile, ONGC will look to push ahead with the upgradation of its Mumbai and Vizag refineries, if feasible.
In our base case, we expect the company’s refinery capex will increase from fiscal 2022 as oil prices recover and profitability improves,” said S&P.
“We believe ONGC’s dividend payments will be lower in fiscal 2021.
“However, we assume shareholder payments will scale up from fiscal 2022.”
S&P expects the company to pay Rs.40 billion-Rs.45 billion in dividends in fiscal 2021, increasing to Rs.said 65 billion–Rs.80 billion in fiscal 2022.
ONGC contributes about 70%-75% of total oil and gas production in India and is one of the largest E&P companies in Asia.
“We believe ONGC’s public policy role to maintain and build oil reserves in India supports its very important role to the Indian government,” said S&P.
S&P Global Ratings affirmed its long-term issuer credit rating on ONGC and the long-term issue rating on the company’s senior unsecured notes at ‘BBB-‘.
The stable outlook on ONGC for the next 12-24 months reflects the outlook on the sovereign credit rating on India, said S&P.
The rating on ONGC remains constrained by the sovereign rating on India. That’s because the company may face extraordinary negative government intervention if the sovereign comes under financial stress or if oil prices are high. fiinews.com