High crude price effect: ONGC stock in focus as Q1 profit before tax hits record high

Shares of state-owned Oil and Natural Gas Corporation (ONGC) more than doubled its June-quarter profit, as elevated crude oil prices and higher realisations offset a marginal decline in production. The country's largest oil and gas producer reported a consolidated net profit of Rs 17,033.81 crore for the April-June quarter (Q1 FY27), compared with Rs 8,024.23 crore a year earlier. Profit also rebounded sharply from Rs 6,649.97 croreposted in the preceding January-March quarter.

Total income rose 45.5% year-on-year to Rs 48,321.65 crore, while profit before tax climbed to a record quarterly high of Rs 22,848 crore, underscoring the benefit of stronger commodity prices during the period.

ONGC's net crude oil realisation from its nominated fields increased to $99.45 per barrel in the quarter, up from $66.13 per barrel a year ago, significantly lifting earnings.

ONGC's earnings are highly sensitive to movements in global crude oil prices, as the company sells the crude it produces to domestic refiners at prices linked to international benchmarks such as Brent.

When global oil prices rise, ONGC's net crude oil realisations increase correspondingly, providing a significant boost to revenue. During periods of elevated prices, net realisations can exceed $95–$100 per barrel, substantially strengthening the company's financial performance and, in some cases, leading to a sharp jump in quarterly profits.

Higher crude prices also have a pronounced impact on profitability because ONGC's production and operating costs remain relatively stable. Since extraction expenses do not rise at the same pace as oil prices, a larger share of the additional revenue flows directly to the bottom line, resulting in wider operating margins and stronger net earnings.

The company also reported robust contributions from new well gas. Revenue from the segment stood at Rs 3,998 crore, accounting for nearly 38% of revenue from its nomination gas portfolio. The higher pricing generated an additional Rs 1,897 crore over the administered price mechanism (APM) gas price.

Production, however, remained under pressure. Crude oil output declined to 4.45 million tonnes from 4.68 million tonnes in the year-ago quarter, while natural gas production edged lower to 4.76 billion cubic metres (bcm) from 4.85 bcm.

ONGC attributed the lower output to reservoir complexities at the KG-98/2 block, adverse weather conditions affecting western offshore operations, delays in pipeline replacement projects and temporary shutdowns during the commissioning of key infrastructure.

Despite softer production, stronger oil prices and improved realisations enabled the company to deliver its highest-ever quarterly pre-tax profit, highlighting the sensitivity of its earnings to commodity price movements.

The earnings were announced after market hours on Tuesday. ONGC stock rose 0.39% to Rs 241.80 in the previous session.

Total 1.94 lakh shares of the firm changed hands amounting to a turnover of Rs 4.69 crore. Market cap of the firm rose to Rs 3.04 lakh crore.