MOSL: ONGC (Buy)-EBITDA below estimate-gas production up 2.2% YoY (-3.2% QoQ)

ONGC: EBITDA below estimate; gas production up 2.2% YoY (-3.2% QoQ)

(ongc IN, Mkt Cap USD32.9b, CMP INR174, TP INR218, 26% Upside, Buy)

• ONGC’s reported EBITDA of INR114b (+69% YoY, -9% QoQ) was below our estimate of INR131b, led by marginally lower realization and higher opex. Other expenditure was higher at USD9.8/boe in 4QFY18 v/s USD6.6/boe in 4QFY17 and USD7.0/boe in 3QFY18, led by higher work over costs, water injection costs, transportation costs, and repair & maintenance cost.
• PAT of INR59b (+36% YoY, +18% QoQ) was slightly ahead of our estimate of INR57b, led by higher other income of INR37b (est. of INR14b; -17% YoY, +231% QoQ), despite higher interest cost of INR5.9b (est. of INR2.5b; +86% YoY, +92% QoQ).
• Net realization grew 21% YoY (+10% QoQ) to USD66.7/bbl in 4QFY18. Subsidy sharing was nil; we model nil subsidy sharing for FY19 and FY20 as well.
• Oil sales declined 3.8% YoY (-0.4% QoQ) to 5.90mmt, and gas sales grew 3.5% YoY (-4.2% QoQ) to 4.79bcm. Oil production declined 3.0% YoY (-2.2% QoQ) to 6.20mmt, while gas production grew 2.2% YoY (-3.2% QoQ) to 6.08bcm.
• For FY18, EBITDA grew 22% YoY to INR440b and PAT grew 11% YoY to INR199.5b. Realization stood at USD57.33/bbl v/s USD50.27/bbl in FY17.