Q3 2012 Earnings Call – ONGC Dt-8 Feb’12

Operator Good afternoon ladies and gentlemen. I'm Varun Puri, the moderator of this call. Thank you for standing by, and welcome to the Third Quarter FY12 Earnings Conference Call of ONGC Limited. For the duration of presentation, all participants' lines will be in listen-only mode. There will be a brief highlight of the quarterly results which will be followed by a question-and-answer session. I would like to now hand over the conference to Mr. Ghasolia. Over to you, sir.

B. L. Ghasolia, Advisor Finance, ONGC Thank you Varun. Good afternoon friends. I am B.L. Ghasolia. We have with us Director of Exploration, ONGC, Mr. S. V. Rao; Director Finance, ONGC Videsh Limited, Mr. S P Garg; Head Finance ED, Mr. A.K Banerjee from ONGC. My colleague from Investor Relations sell Mr. Nelson and Mr. Chaudhary and other colleagues from Finance department. And first of all, I will request Mr. Rao to give you a brief synopsis on the fiscal achievements for the quarter. And after finishing the brief overview of the fiscal achievements, Mr. Banerjee will give financial highlights for the quarter and also the results for the nine months.

Over to Mr. Rao. Hello. Yes sir. You can start.

S. V. Rao, Director, Exploration There you are right, go again. Afternoon if it is so. Ladies and gentlemen, I welcome you all to this third quarterly earnings call of ONGC. I'll briefly appraise you about the physical achievements for the quarter ended December 2011. I hope you can hear me well enough. During this quarter, ONGC has made five new discoveries and so far has made 20 during the current year. During the quarter ONGC has produced 5.96 MMT of crude and 5.85 BCM of gas from domestic operations, besides producing 0.779 MMT of crude oil and 0.545 BCM of gas from domestic joint venture field.

Cumulatively for the nine months period, the production figures stand at 17.933 MMT of crude and 17.288 BCM of gas from domestic operations, besides 2.40 MMT of crude and 1.663 BCM of gas from domestic joint ventures. During the quarter, ONGC has drilled 33 exploratory wells and 59 development wells. 26 exploratory wells were drilled in onshore areas and seven in the offshore, comprising three in shallow water and four in the deep-water. Out of the total development wells drilled, 52 wells were in onshore areas and seven in shallow water.

Now, I hand over to Mr. Banerjee to appraise you about the financial results for the third quarter ended December 2011.

A. K. Banerjee Thank you, sir. Good evening to all of you, I don't have any good evening or good afternoon anyway. Now I am just going through the financial results for the third quarter and in some cases after third quarter also. So the company has earned net profit after tax of Rs.6,741 crores during the third quarter FY12 as against 7,083 crore during the corresponding period of the 2010-'11. There is a decrease of 342 crore approximately 5%, and the profit after tax for the first nine months, that is three quarters together for FY12 is 19,479 crore against last year's corresponding figure of 16,133 crore. There is a increase of 21%.

Decrease in profit after tax during the quarter was mainly on account of decrease in crude oil sell by Rs.1,030 crore. There is a decrease in profit petroleum surrender to GOI this actually offsetting -- there by 134 crores increase in -- and DDA cost by 891 crore. And there is reduction in interest dividend and other income by Rs. 535 crores. Increase in provision for the corporate tax 404 crore as against subsidy there is a sharp increase vis-à-vis last year.

Now our shares subsidy towards, recovery for oil marketing during third quarter 2012 at Rs. 12,536 crores against last year 4,222 crore in Q3.

You may recollect that for the last nine months, we heard in the last year it was 12,757 crores but this year for the three quarter together the figure stood at Rs. 30,296 crores. The gross sales revenue for Q3 is less by 449 crores at Rs. 18,199 crores during -- 18,199 crores in current quarter as against 18,648 crores in Q3 last fiscal.

As we already indicated that it is mainly because of the under recovery. Gross billing for crude during Q3 FY12 was at 111.735 barrel as against 189.13 per barrel in the same period last year. That is a increase of 25.36% in our per barrel price but this is a gross price not the actual retail price by ONGC.

After allowing discount, my -- contribution towards the under recovery of downstream oil by marketing companies, the net realisation

for crude in the current quarter was $44.96 per barrel as against 64.79 barrel in the same period for the last year, decrease of 30.6%.

Similarly gross billing for the nine months for this year stood at $116.24 per barrel as compared to $83 per barrel for the nine months in the last fiscal. The net realisation also after discount for the first nine months of the current year is 58.61 per barrel vis-à-vis $58.72 per barrel in the nine months for the last year. Thus, even in the current year, our gross price is more than last year but the retain earnings is almost same.

The exchange rate of rupee versus dollar stood at Rs. 51 vis-à-vis $1 against Rs. 44.86 in the third quarter of FY11. Thus, the post discount realisations for crude in rupee terms at Rs. 2,291 per barrel in Q3 current fiscal versus Rs. 2,906 in Q3 FY11 is a decrease of 21% in India rupee term.

For the nine months for the financial year '12, the net realisation in Rs. 2,764 per barrel vis-à-vis Rs. 2,682 per barrel in the nine month financial '11. Interest and dividend income, there's an increase by Rs. 287 crores in Q3 current fiscal from Rs. 659 crores to Rs. 946 crores, this increase is mainly due to increase in average rate of insurance on our investable fund in Q3 FY12 to 9.94% against 7.29% of the last year Q3.

Other income has decreased by Rs. 1,822 crores mainly due to non receipt of any surplus from gas pool account in the current quarter, against Rs. 1,898 crores received in third quarter last year.

The overall decrease of Rs.3,484 crore in other income is offset by Rs.3,142 crore received from Cairn India Limited towards royalty for the period August to September '11, rather August 2009 to September 2011 pursuant to finalization of the agreement between ONGC, Cairn, Vedanta and their associates during the quarter. The operating expenses in Q3 FY12 have marginally increased by Rs.91 crore to Rs.3,308 crore against last year's 3,217 crore.

DDA cost for Q3 FY12 stood at Rs.4,532 crore against last year's figure of 3,641 crore with the increase of Rs.891 crore which amounted 24%. This is mainly because of increase in dry well cost by Rs.690 crore that is from 1,361 crore to 2,051 crore, an increase in depletion cost from Rs.1,381 to Rs.1,834 crore mainly due to capitalization of six well platforms, one process platform, five light and so light in offshore. This is partly offset by decrease in Rs.254 crore in depreciation and survey cost. During Q3 '12, the geography levy stood at far Rs.3,945 crore as compared to Rs.3,949 crore of Q3 '11.

Royalty on entire production of non-operated Rajasthan block and RJ-ON-90/1 for the current quarter has been considered as statutory levies in line with PSC and the operator share of royalty amounting to Rs.627 crores has been accounted for on a --. Cairn has clarified that a first six, till 30th of September we are treating as other income, this is their one time arrangement with Cairn Energy, Cairn India. But now from 1st of October we are treating it as an revenue. So that's why 627 crore is accounted for as revenue in the third quarter current fiscal.

So with this I finished my briefing on the third quarter financial results. Now we are ready, we'll be happy to take your questions. People are here, all senior people from ONGC as well as -- are there. Thank you.

B. L. Ghasolia, Advisor Finance, ONGC Now Varun, you can take over now for question answer.

Questions And Answers

Operator Yes sir. Thank you. Participants we will now begin with the question-and-answer session.[Operator Instructions]. Thank you. The first question is from Amit Rustagi from Antique Stock Broking. Amit your line is unmuted, please go ahead.

Amit Rustagi Good afternoon sir. Sir my question is related to subsidy sharing mechanism which you've adjusted for nine months. Can you clarify, is this going to be applicable for the full year FY12 or is it only for first nine months? As far as the subsidy sharing it is not very clear which, whether the same policies will continue, because earlier so far we understand that earlier what they used to. They use to take the entire unrecovery by the oil marketing companies, and then out of that they use to put one particular share, there maybe this is one third initially started in sometime, even last year it was 38 plus percent. So for the E&P companies including GAIL, what they have done, they have taken quantity sold by ONGC and Oil India and on that they have applied $56 per barrel and they have found out that this is the amount they will allocate for the feisty oil companies.

Amit Rustagi Okay.

Corporate Participant And the amount has been distributed between these three companies on the basis of their PAT.

Amit Rustagi Yeah.

Corporate Participant For the last three years, that's what we understand, because we don't have any kind --. But that is what -- there is a shift from the -- it is a coincident that it is -- is coming 37.97% of the total subsidiary. But I don't know...

Analyst My question is related to normally the government gives a hint about the mechanism to be done for full year, like earlier years they used to mention the percentage, now they have mentioned that $56 will be taken as subsidy from upstream companies, so is the letter given to you indicates that this mechanism is applicable for FY11 or FY12 or it is just, it is return and it is applicable only for first nine months.

Corporate Participant So far they have -- this mechanism also they have not spelt out clearly, it is only we feel that from various this reports and then interactions, but as far as subsidy is concerned they only simply, they have intimated some figures for the first nine months, that's all regarding the last quarter, they have not yet give anything, and so the mechanism is like that.

Amit Rustagi Okay. And sir, can you update on the development of the UD1 discovery because we are reading different reports in media like either, few media reports that indicating that DOC has been approved and you have to file FDP, few media reports are indicating FDP has been filed. And so, can you just clarify that which stage we are at in UD1?

Corporate Participant Amit Rustagi Yeah.

Corporate Participant And the fact of the matter is the approval is yet to be a accorded and there is interaction going on between MOPNG and DGH and we should be hearing shortly from there.

Amit Rustagi Okay. And then we will be filing an FDP on that, once the DOC is approved?

Corporate Participant Could depend on what they actually bring out in their -- and their letter to us.

Amit Rustagi

Okay. But sir are you finding it really difficult to develop it on your own? Or basically you are awaiting some partners to join you before you go ahead for development?

Corporate Participant I think ONGC has been very open about this that given the water depths that these discoveries are in, global player in the game -- not very easy for ONGC to do on it's own. So we have always been keenly interested in seeing that we get some partners in for development options of this kind.

Amit Rustagi Okay. That's all from my side, sir. Thanks a lot.

Corporate Participant We are actually working on this and we should see some light...

Amit Rustagi Okay sir. Thanks a lot sir.

Operator Probal Sen Thanks. Hi good evening sir. Just two questions, one was the increase in dry wells, are these primarily offshore wells that have actually been booked for in this quarter?

Corporate Participant Largely in deep water, more than five wells are actually in the deep water.

Probal Sen Okay.

Corporate Participant Of them is our discovery also, but normally we would not take them to be accounted for because of the fact that we may not go back to those wells for...

Probal Sen Okay.

Corporate Participant ...any purposes of exploitation.

Probal Sen Okay. So the second question there was sir, how many deep water wells are planned in the last quarter of this year now?

Corporate Participant We are having five.

Probal Sen Another five to be drilled?

Corporate Participant Yeah. Okay. Lastly sir, any guidance on what has happened to OVL in this quarter, in terms of production and any guidance on CapEx and what's happening in Russia? On imperial.

Corporate Participant As far as OVL is concerned, Q3 results are yet to be announced or finalised.

Probal Sen Okay.

Corporate Participant We are planning to hold Board meeting on 22nd, and I think you will have to wait for Q3 results till then?

Probal Sen Sir, when are you holding the Board again?, Sorry.

Corporate Participant 22nd of this month.

Probal Sen 22nd. Okay. Just about the, not so much about the numbers, but have the numbers or anything improved as far as Imperial Energy is concerned. Just want some color on that that's all?

Corporate Participant Okay. Imperial Energy is concerned, the production level is more or less on similar lines as were earlier.

Probal Sen So that's about 17,000, 18,000 barrels is it?

Corporate Participant No it is 14,000 15,000 barrels.

Probal Sen Okay. Alright. Thanks. That's all from my side. Thank you Probal.

Corporate Participant

You might be aware there us little -- some problem in Sudan and Syria stronger also, that is...

Probal Sen So has the production dropped from those regions sir?

Corporate Participant Yeah in fact so far as Syria is concerned there is, the sanction problem because the Europe Union and U.S. have sanctioned that not only the exports from Syria but the particular entity which is ASPC and DPC and Citrol.

Probal Sen Right.

Corporate Participant So they also have been both under sanctions.

Probal Sen Okay.

Corporate Participant So due to that right now the production level has come down and so far the project, was the operator in case of Syria project and they have sent a force majeure notice. So that is the situation in case of Syria.

Probal Sen Okay.

Corporate Participant And Sudan basically is after separation of Sudan in two countries South Sudan and North Sudan, there were certain issues within two countries which they are trying to sort it out. Pending resolution of the disputes between the two countries, the South Sudan has presently shut down the entire production in the areas falling under their territory.

So, basically in Sudan from around 23, 24th January we are now producing only about 57,000 barrels per day as against the earlier production of about 120,000 barrel. And our share in the project is 25%. Okay. So but then these would reflect mostly in the Q4 results now, at least for Sudan right sir? Syria I understand was probably stopped earlier?

Corporate Participant Syria effect is coming in Q3 also.

Probal Sen Okay.

Corporate Participant Sudan effect will be coming in Q4.

Probal Sen All right. Fair enough, sir. Thank you very much. Thanks, that's all from my side.

Operator Thank you, Probal. [Operator Instructions]. Thank you. The next question is from Rina Sanghavi from SPA Securities Limited. Rina, your line is unmuted. Please go ahead.

Rina Sanghavi Good evening, sir. Congratulations for the good numbers. Sir, I have two questions, one I missed out how many exploratory and developmental wells you drilled in this quarter?

Corporate Participant We actually drilled 33 exploratory wells and 59 development wells in this quarter.

Rina Sanghavi Okay. And sir, what is the success ratio this quarter?

Corporate Participant As I said we had five discoveries out of these 33. A fair bit of a head.

Rina Sanghavi Corporate Participant It is actually little more than 56, the mix revision is 58.61 per barrel, in fact our -- because 56 is basically government is taking away.

Rina Sanghavi Okay.

Corporate Participant So, the balance we're getting. But because of the distribution among the three companies, so even if our original billing is little more than that, our share is coming little more than 56, so that's why you were getting, we have got about 58.71, 58.61 for the nine month period, but for the current quarter it is 44.96 because you may recollect that in the first quarter, our recover -- we got about 48 something per barrel.

Rina Sanghavi Yeah.

Corporate Participant Second quarter we got about 83 something per barrel

Rina Sanghavi Yeah.

Corporate Participant And for the six months together our average was 66. So now the average is 56. So to make this average 58.61.

Rina Sanghavi Okay.

Corporate Participant Current quarter retention is only 44.96 per barrel. Is it clear?

Rina Sanghavi Corporate Participant No, no idea. I can't say because government has not yet confirmed anything about fourth quarter. So we can't say immediately.

Rina Sanghavi Okay. And sir in case of ONGC and Oil India it is that on the basis of dollar per barrel of production, but in case of GAIL like how it is calculated, because it's not purely 38%, you said that it's based on realization.

Corporate Participant No, actually what is happening now this is 37.9% is coming, most likely.

Rina Sanghavi Yeah.

Corporate Participant Now this was which is a derived figure. So there is a subsidy figure, under-recovery of the oil marketing companies.

Rina Sanghavi Yeah.

Corporate Participant Now this is one figure. And government has mocked out about 56 per barrel from our head of ONGC and Oil India's sales quantity.

Rina Sanghavi Okay.

Corporate Participant So this is another figure. So it's like that their first figure is suppose X and second figure is Y. So Y is happens to be 37.9% of X. It's like that.

Rina Sanghavi Operator Thank you Rina. The next question is from Mayur Patel from Spark Capital. Mayur your line is unmuted. Please go ahead.

Mayur Patel Thank you sir for taking my question. Couple of question, the first one you told 627 crores royalty relating to that Cairn is adjusted in sales revenue.

Corporate Participant Yes.

Mayur Patel So if I want to see average realization, I would have to reduce the 627 crore from your 18,198 crores, and then look at the underlined average realization. Is it the right way to look at?

Corporate Participant Yes exactly. Our revenue include this 627 crore, that is included yes in the current quarter.

Mayur Patel And sir going forward what would be the treatment of this royalty from... ?

Corporate Participant Royalty, because this, it is our surplus liability and whatever be the outcome you have to pay first. So we'll be treating, I mean we have discussed with the auditors also, so we will treating as our expenditures first, it's a royalty because there is another person which is his responsibility to pick up the expenditure. And then this as far the BSE, so we are getting a share of our production. So our entitlement to our production is increased. So naturally we are treating it as our income. So, this will be the way, I mean so far we have decided and we have discussed with the auditors and we'll be treating it like that. And that's why third quarter has been taking care of that way, but still 31st of September since this was already, the production was already distributed earlier, so naturally the one time arrangement so we have to differ in treatment

Mayur Patel Sure.

Corporate Participant Mayur Patel So going forward...

Corporate Participant So going now onwards we plan to treat it like that, actually gets full expenditures will royalty be our expenditure since it is our primary responsibility to pick up the expenditure.

Mayur Patel Okay.

Corporate Participant So whatever our interest menu is there to the production that we will be treated --.

Mayur Patel

And sir this depletion rate has increased because of this capitalization, the six well platform and one process platform, can you specify how it is related to which block?

Corporate Participant These are all company sharing block.

Corporate Participant One was 322, 2009 one of them.

Mayur Patel Sorry?

Corporate Participant Marginal fees, both are marginal fees, just give us a minute.

Mayur Patel Okay. Both of these are marginal fees.

Mayur Patel Okay. And sir last one what is the -- I just didn't get this 33 exploratory well, how much of this was deepwater?

Corporate Participant Actually of this lot four were deepwater, three were shallow water the rest were all 26 onshore. And remember that when we talk about 33 exploratory wells being completed part, these would not has been tested, okay, so you would get into discovery subsequent to this whole thing, we consider a well completed the moment it is geometrically tested and the final casing is lowered. So you would find cases that wells are shown as complete, whereas the testing would be subsequent to that event.

Mayur Patel Sure.

Corporate Participant So that 33 some of these wells would get tested later and we'll figure out discoveries in the later quarter.

Mayur Patel Fine, sir. Just last question like when you were touching upon this subsidy thing, you were saying $56 per barrel into the total quantity of ONGC and Oil India, you arrive at a figure, which is why. So this figure you need to add the GAIL's contribution and then see it as 37.9% of the total under recovery, is it?

Corporate Participant No, no. Actually what happens. Now this -- so far we can -- because this is also not shared in black and white by the government.

Mayur Patel Sure.

Corporate Participant We understand that this $56, they have taken out, to arrive at this figure, that how much these three companies will share. So for that they have taken $56 per barrel of oil sold by ONGC and Oil India. And this amount has been shared between these three companies. So GAIL is not selling in crude oil, so but GAIL has taken the share of this. So this what. Got it sir. Fine sir. Thanks a lot sir.

Corporate Participant Welcome.

Operator Thank you Mayur. The next question is from Tarun Lakhotia, Kotak Securities. Tarun your line is unmuted. Please go ahead.

Tarun Lakhotia Sir what is the reason for higher tax rate in this quarter?

Corporate Participant Higher tax rate?

Tarun Lakhotia Yeah it is at 36.5% versus like effective tax rate of 32%?

Corporate Participant This tax impact, this tax rate -- because in the E&P company, this taxable profit and accounting profit there is a huge difference. Whatever treatment we give for deriving profit before tax and taxable profit, there are supposed to be quite mismatch.

So this, that is -- even if you see the profit before tax for the current quarter vis-à-vis last quarter -- last year third quarter profit before tax may be there may not be much difference but this year the tax is more, this is mainly because of treatment -- there is differential treatment of tax -- to arrive at the taxable profit vis-à-vis accounting profits. Anyways that -- is there, he will again supplement.

Corporate Participant See basically while arriving at the tax liability, we do incur certain expenses on R&D activities where we will get a higher reduction, so the effective tax rate is currently around close to 32%, but nine months if you take it together because it is similarly to the -- the balance tax are accounted with the quarter. So, on nine basis, it is 33% mainly on account of R&D expenses.

Tarun Lakhotia Okay. And sir one more thing, out of this total adjustment of 3,140 crores for Cairn's share of royalty, how much is pertaining to the prior period, I mean, till FY 2011? Corporate Participant 2011, Tarun we can share this figure separately with you, right now we don't have the number available.

Tarun Lakhotia

Okay, sir. Thank you. That's all from my side.

Operator Thank you, Tarun. The next question is from Harshad from Motilal Oswal Securities. Harshad, your line is unmuted. Please go ahead.

Harshad Borawake Hi. Thank you. Sir, can you just make us understand in terms of Cairn India JV P&L, on a simplistic terms how will it work in case you get a gross realisation of $100. Can you just explain the cost items in that?

Corporate Participant Hello...

Harshad Borawake Yeah in Cairn India, in case the realisation is $100 now post this royalty recoverablity. Can you just explain how accounting would work?

Corporate Participant This is with reference to Cairn Energy, Cairn India?

Harshad Borawake Cairn India, yeah.

Corporate Participant No, what we do, now whatever this -- we have to first of all pick up the royalty in 20% or whatever percent the royalty of the entire quantity.

Harshad Borawake Okay. Because since we are the license holder, so we have to pay the entire royalty, as far the statute.

Harshad Borawake Okay, it will be the gross item.

Corporate Participant It is responsibility and ONGC's expenditure.

Harshad Borawake Okay.

Corporate Participant So this we will pay -- expenditure. Subsequently, because when they get production, that production is shared. There is entitlement one is that 30, 70 shares but in addition, the entitlement changes because of discontinuation by various companies. So still we have

contributed this extra, so for that our entitlement it will be production quantity increases.

Harshad Borawake Correct.

Corporate Participant So now we get 30%, it may be 40, 45 whatever it is.

Harshad Borawake It will vary every quarter?

Corporate Participant So -- share of our production that and ultimately which is sold. So we treat it as our revenue.

Harshad Borawake Okay.

Corporate Participant This is what the accounting we have reached. So this is the 627 crores which we have accounted in this quarter.

Corporate Participant Third quarter, for the third quarter this 627 crore we have got.

Harshad Borawake So similar accounting treatment will be done henceforth.

Corporate Participant Henceforth it will be like that, yes.

Harshad Borawake Okay. And...

Corporate Participant Account will vary because depending on the production quantity and other things. And there is government take and others. But this will be roughly like that.

Harshad Borawake Sure. And secondly can you just guide us on the production target for FY12 and '13 both in oil and gas?

Corporate Participant

Just a minute please.

Harshad Borawake And also on standalone and JV if you can give it separately.

Corporate Participant FY13 crude oil production target is 25.046 and natural gas production is 24.877 this year.

Harshad Borawake And this is including JV or standalone? No, it's only the domestic production from ONGC.

Harshad Borawake Okay. And JV guidance would be?

Corporate Participant JV share, the crude oil production interest that thing will be 3.719. The total JV it will be 28.765 MMT and gas production from JV would be 2.141 BCM, So total production from ONGC plus JV would be 27.018.

Harshad Borawake Okay. Fine. Thank you. And sir you will be providing this first half of royalty which you have got from Cairn separately right?

Corporate Participant Yeah. Yeah we will provide that to you.

Harshad Borawake Okay sir. Thank you. Thanks a lot.

Operator Thank you Harshad. The next question is from Nipun Sharma from Asset Securities. Nipun your line is unmuted. Please go ahead.

Nipun Sharma Yes. Thank you. Good evening. Just I have a couple of questions. First question is what is the latest communication from the government on the divestment, will it be done by auction or through market, any understanding on that so far?

Corporate Participant In fact this is government has to decide. We have not got any communication from government in this regard. Whatever is available in news in fact that would be -- the last meeting over a month back only we had called and that time government told that they will review this -- that's what latest you have. So we have..

Nipun Sharma Have you set any target on when this review will be done and when we will get some kind of answer on the kind of divestment

program? Corporate Participant No, nothing has been communicated to us so far. And it is understood that they have told they had a meeting last week and they told after 10 days again EGoM or EGoM will state again and take a call. So, something to be done they will come -- nothing has been communicated to us so far.

Nipun Sharma Okay. Understood. Second question is on the Rajasthan joint venture. I understand this is now the most profitable asset that ONGC owns. And there were talks about raising the production, what's the stands on the Mangala field being ramped up from 125 to 150. What's ONGC's understanding about the process and how long this will take?

Corporate Participant The ramp up of production. We'll probably get back to you later please on this front.

Nipun Sharma Okay

Corporate Participant Because we need to be sure.

Nipun Sharma Okay. And my last question is on the deep water discovery that you have seen so far. Obviously the realized crude oil price tends to vary quarter-on-quarter. But judging from what you've seen over the past couple of years what kind of realization do you need to commercialize these deep water oil discoveries?

Corporate Participant One must understand that for the discoveries that are made in the NELP acreages, the PFC would fail which would mean that we would be actually getting prices again to any company. So they would all be controlled as per the prevalence international crude prices.

Nipun Sharma Yeah. But what kind of price do you need to see to make -- discoveries make commercial sense.

Corporate Participant Most of these discoveries are actually gas and you have two segments of discoveries in 98/2. One is in the ultra-deep sector and one is in the shallow or deepwater sector. Yeah.

Corporate Participant So shallow or deepwater sector is something where we hope to produce about 87 BCM and this is what we will really fast track. And...

Nipun Sharma Right.

Corporate Participant ...if this would be in combination with discoveries in the nomination acreages, so there could be a differential between trying to produce this in the shallow or deepwater vis-à-vis the ultra-deepwater. And we would...

Nipun Sharma What about in terms of...

Corporate Participant handle on the precise MMBTU figure. But there would a degree of comfort for the Northern ones. The shallow or deepwater.

Nipun Sharma Right. And what about in terms of the oil discoveries you have seen so far. I mean I know it's mostly been gas so far but in terms of oil, I mean shallow water, for it to make commercial sense and ultra-deepwater for it to make commercial sense, given a reasonable IRR?

Corporate Participant As far as the oil part, we have expectations of about 170 million barrels of in place oil, we could produce about 5 million tonnes in all hopefully. And so it's not really big time so as far as the oil is concerned, it's really -- not really something which will get into the economic scenarios to a great extent.

Nipun Sharma Okay. Thank you very much.

Operator Amit Rustagi Hello?

Operator Yes Amit you are audible. Please go ahead and ask your question.

Amit Rustagi Yeah. Actually my question relates to the next year production target. Sir we are still maintaining us to 28.75 per million tonnes for FY13 as oil production and 32.1 million tonnes for FY14? So how much confident we are in achieving these target?

Corporate Participant Fairly confident.

Amit Rustagi Sir because see for last few years we are seeing less production growth in oil, whatever production growth is coming is coming because of Cairn JV. So basically, are we confident that all our fields like B-22, B-4, B-193, Heera and South Heera are redevelopment which we have talked earlier are on track to produce in FY13 and '14?

Corporate Participant Definitely so. I think most of these cases including the C-Series and Daman and the rest of it.

Amit Rustagi And sir what is it...

Corporate Participant We should see a add-on of about roughly 3 million.

Amit Rustagi 3 million tonnes in FY13?

Corporate Participant Amit Rustagi But, sir all those plateaus and declines would have been considered by you while giving the targets for FY13 and '15...

Corporate Participant ... there would always be a positive to the whole business from '13, '14.

Amit Rustagi Okay. And what is the status on R-Series development where SR Oil is there, are we sending the -- because that can add significant amount to your productions, if it comes through? R-Series.

Corporate Participant It's entirely between the government and DGH so we really are waiting.

Amit Rustagi Sir but are you putting any pressure because this is like a very easy to do field and production can be significant as far as with respect to the capital expenditure which you are looking at, so like are you, a particular discussion which is happening between SR and DGH or government?

Corporate Participant If the thing comes back to us we'll talk.

Amit Rustagi So, but sir what is the status now basically?

Corporate Participant On...?

Amit Rustagi On this R-Series development?

Corporate Participant Amit Rustagi Okay. Okay, sir. Thanks a lot. That's all from my side.

Operator Thank you Amit. The next question is from Rakesh Sethia from Morgan Stanley. Rakesh your line is unmuted. Please go ahead.

Rakesh Sethia Thank you very much for the opportunity. I have one question on the tax rate. Basically what would be the tax which would be attributed to the exceptional item of the royalty which you have booked? So what would be the amount related to that?

Corporate Participant Can you repeat your question, Rakesh?

Rakesh Sethia Yeah sir. Sir, can you identify the amount of tax which is related to the exceptional item of royalty?

Corporate Participant Exceptional item only for royalty.

Rakesh Sethia Yeah. So for example, you have paid about 31, you received a royalty about Rs.31 billion from Cairn India and you have booked as an exceptional item, what would be the tax amount on this the whole royalty amount?

Corporate Participant This amount will be treated as an other income of..

Corporate Participant Business income.

Corporate Participant Business income of the company. So it will have the normal tax rate only. Okay. So about 33%.

Corporate Participant Yes.

Rakesh Sethia Okay. Thank you.

Operator Thank you Rakesh. The next question is from -- Niraj from Edelweiss Capital. Niraj your line is unmuted. Please go ahead.

Analyst Sir, just wondering on the other expense, sequentially there is a comedown to around, by around 200 crores or so. Any specific

observation you had on that? Like against September quarter and December quarter, the December quarter is lower to the extent of 200 crores. Any observation you had on the reason for that?

Corporate Participant Niraj, Niraj can you specify the element or item if you have the details?

Analyst 31 crores, 34 crores in December quarter and 33 crores, 36 crores in September quarter, the other expenses.

Corporate Participant Give us some moment. Let us try to figure out where are you taking the figure from.

Analyst Sir meanwhile can I go ahead with another question?

Corporate Participant Yes. Yes in the meantime you go ahead.

Analyst Corporate Participant As you know we had planned for Mumbai High South 18.31 MMT for oil and 2.7 of gas for the total period of the Phase II. And we are very confident that we should be completing this exercise by March 2013. As far as the Mumbai High North redevelopment project with a incremental production of 17.35 of oil and 2.98 of gas, drilling schedule is likely to be completed by September 2012. So we're fairly confident that both these projects are under control and we're getting some rigs to ensure that the drilling programs are not affected.

Analyst Okay. And sir what will be the peak -- production once you envisaged from these two projects because these two are fairly large projects as far as ONGC is concerned.

Corporate Participant Repeat your question please.

Analyst Yeah. What do you envisage the production increase in the first two-three years after the completion of these projects?

Corporate Participant We expect that we MHN would be producing around 4 million tonnes and MHS around 6.2 million tonne -- 6.4 million tonne. And cash, the peak would be from MHN could be roughly around 2.5 and MHS would be something about 5.6.

Analyst So, does it imply that if these projections, the actuals come out to close to what you are projecting, the production on FY13 and '14 will be much, much significantly higher then what you have put in as a current targets as of now?

Corporate Participant This together will give us 2 tonnes or 3 million tonnes in '13-'14, this is including.

Analyst Okay.

Corporate Participant Analyst Okay. And what is the cash that ONGC is holding right now?

Corporate Participant We don't -- right now the exact figure, you want the right -- at this point of time, what is the cash? It is about 25,000 but out of that about 8,500 or may be 9,000 is... Can you -- what we will do, we will confirm afterwards because this figure we don't have a exact figure, it is roughly about 25,000.

Analyst Okay and that would include the site restoration as well right? The deposit...?

Corporate Participant That is what, we are not very sure, about his figures. So that's why it's better that we give you the figures afterwards.

Analyst Okay and anything on the other expenses coming back to the first question?

Corporate Participant Others, you are referring to other expenses ?

Analyst Basically the operating expenses which are there.

Corporate Participant Q2 to Q3 or...

Analyst Q-on-Q

Corporate Participant Pardon? Q-on-Q? Yeah.

Corporate Participant So this is -- and the -- is other expenses.

Analyst No it's like, okay anyway.

Corporate Participant Figure you have?

Analyst other expenditure, 3,134 crores? Anywhere. It is not a significant amount, sir. We can go ahead with other Q&A.

Corporate Participant Okay.

Analyst Thank you, sir.

Operator Thank you, Niraj. The next question is from Rohit Nagraj from Centrum Broking. Rohit, your line is unmuted. Please go ahead.

Rohit Nagraj Yeah. Sir on a sequential basis, our crude production has comedown from about 6.04 million tonnes to 5.96, any specific reason on this? Hello?

Corporate Participant Not really. I mean there is no substantive...

Rohit Nagraj Okay. I mean it is, I mean it will be close to about 6 million tonnes in Q4. So nothing specific reason to it? Yeah, there is nothing really very specific.

Rohit Nagraj Okay. And sir, secondly on the gas production front during last con-call, you had mentioned that the G-Series --C-Series GS-15 fields were producing about 3 MMSCMD and another 4 MMSCMD is expected to be coming in near term. So has that production come online and if not then what is the time line that we're ascribing for it?

Corporate Participant Basic question is there was this B-22, BS-12, BS-13 gas production, and B-149 so these are on stream to be produced, so these should be coming up as well as at some point of time -- so things are okay in terms of the drilling completion and testing, other things should be in shape shortly, so not to be worried about any delay there.

Rohit Nagraj Okay. And this will add about 3, 4 MMSCMD incremental, right?

Corporate Participant Roughly by about 13, 14, yes.

Rohit Nagraj Okay. And secondly sir I missed out on the Q '13 guidance of crude. Can you just repeat that, crude production guidance?

Corporate Participant 35.04 -- crude oil production.

Rohit Nagraj Right. And for JVs.

Corporate Participant 3.719.

Rohit Nagraj 3.719. Okay. Alright. That's all from side. Thank you. Thank you, Rohit. The next question is from Saeed Jaffery from Premji Invest. Sayeed your line is unmuted, please go ahead.

Analyst Yeah, good evening gentlemen, thanks for the opportunity. Just a quick question on OVL, like you mentioned there is some disruptions going on in Syria and Sudan. Now if I account for that, what sort of production targets would you have for FY13, broken down into oil and gas.

Corporate Participant No, you're asking about FY13 target or Syria issue?

Analyst No I'm talking about if you account for the CDI issue and lower production from Sudan, what would be our production targets now for OVL as such for FY13?

Corporate Participant So what targets are concerned, the targets are same as they were earlier.

Analyst Okay.

Corporate Participant The net of -- and Sudan we can deliberate separately in the sense that we -- production was from April to August the average was 88,000 barrel per day.

Analyst Okay.

Corporate Participant Our fear is that is about 13.5% to 14%. And the production it came down to first to 70,000 then to 61,000 for the new sanctions which were imposed on with reference 1st December.

Analyst Okay. Hope from 1st December the field is being operated not by later which is sell but by the CDN -- company only. So -has issued post measured notice. So far, we are there in this project along with Chinese through Himalaya energy --. So which again is a European company. So, right now the problem is we are not certain whether whatever production is happening now which we understand is in the range of 50,000 barrel to 55,000 barrel per day. Whether we will be entitled to that production or not that concern is, that issue is yet to be resolved.

Analyst Okay. What are your old targets which is get the old numbers on oil and gas?

Corporate Participant Old numbers, I have on overall basis not separately for each project.

Analyst No, overall broken down into oil and gas subsequently.

Corporate Participant Yeah. Our overall target for '12-'13 was 8.727.

Analyst And this is oil and gas both put together.

Corporate Participant Yeah we have taken together.

Analyst How much will be oil and gas in this separate?

Corporate Participant Roughly 6.2 is oil and 2.5 is gas.

Analyst Thanks. Thank you so much for this. I'm done.

Operator Vinod Bansal Yeah hi. My question is on the Rajasthan block. For the quarter could you tell me what would be your entitlement, overall entitlement from the block as in cost petroleum plus profit petroleum put together?

Corporate Participant Our entitlement is a trend because of the cost recoverability, of the royalty. So our entitlement to the production from Rajasthan block has increased. So at extent, we are treating it as our revenue, like the remaining part. And whatever we pay as royalty as per the statue, that is our expenditure because we have to pick up that. This is what we are treating it.

Vinod Bansal Then what was the revenue then that you have included in your accounts?

Corporate Participant See whatever amount we've received till 30th of September, that was because there is a past period, the question of getting the production quantity did not arrived that time. So as a one-time settlement we have treated it as a other special income, or other income of it. And from 1st of October, we are treating whatever revenue is there as our part of revenue.

Vinod Bansal So what is the number for that?

Corporate Participant We have got from 1st October onwards this third quarter we have got revenue of 627 crores. And one time settlement right from the project time we have got 3,100... just one second.

Vinod Bansal No, yeah. Hello.

Corporate Participant 20 odd crores that has been treated as other income.

Vinod Bansal Let me this little more clear, your royalty that you have paid during the quarter for Cairn share is 627 crores. Is that correct? Corporate Participant Actually, 627 no. Royalty we have paid, separate amount. Royalty whatever we will be paying and like for example, right from the beginning we have been paying royalty. So those royalty we have treated as our expenditure. So again that till 30th of September whatever we have received as a one-time settlement that we have been treated as exceptional item or other income. But from 1st of October whenever we pay royalty that will be treated pick up as our expenditure because this is our obligation to pick up that expenditure.

And because of that whatever our, not only because of that because of our share in the joint venture whatever our production share, share of production that entire quantity will be treated as our income, so that will be treated as revenue.

Vinod Bansal See I'm trying to get that figure, I mean if 627 crores translates into about $125 million which is more or less about 10% of overall block

revenues for the quarter, so that doesn't kind of -- with the kind of entitlement ONGC would have.

Corporate Participant I'm not getting it.

Vinod Bansal Okay. Like the block revenues for the quarter for all the production sold was about $1.1 billion. And out of that you have Cairn share, ONGC share and government share, in terms of profit petroleum. So Cairn share was supposedly what about $600 odd million, so remaining should come to ONGC, if the figure that you have given translates into about 125 million, getting my point.

Corporate Participant No actually what -- that figure I will confirm you back. But it's our Cairn share is whatever is -- Cairn share is -- for the third quarter Cairn total production, I mean production revenue was totally more than 1 billion. And as per your calculation, you supposed to get at least 30% plus.

Vinod Bansal Right.

Corporate Participant Isn't it?

Vinod Bansal Yeah. That's correct. And now that we have to confirm your bank that 648, the company -- 627 crores this is only the royalty part now exactly how much we have accounted for in this in our Q3 revenue, how much is on account of income from Cairn or our entitlement that part we will ascertain and tell you, okay?

Vinod Bansal Okay. So, the 627 crore is the royalty for the 70% share that is confirmed?

Corporate Participant Yes, yes. Exactly.

Vinod Bansal Okay. And sir, one more question...

Corporate Participant Our revenue has gone up.

Vinod Bansal Yeah, sure. One more question for calculation of royalty, you deduct certain post expenses what could be that number for the quarter?

Corporate Participant Okay, that will be provisional number based on the last year's actual transportation cost which should be directed from the share value of the...

Vinod Bansal Right. So any sense on broadly what that number be?

Corporate Participant The number is readily not available, we will let you know.

Vinod Bansal Sure, alright. Thank you. That's from my side. Thanks.

Operator Analyst Yeah, hi sir. My question is I just missed out what is the average net crude price realisation for the nine months?

Corporate Participant It is $58.61 per barrel.

Analyst Okay, so can you just give us some insights about the government plan to cap the price of crude oil for the full year at 54, is that going ahead?

Corporate Participant No idea, in fact we have not got anything, in fact this 58.61 which is just, we have calculated now whatever we have conveyed earlier during, while I was giving you brief, that time also I mentioned that whatever we could understand, I have already explained that how this subsidy has been computed that is what our understanding, nothing is intimidated to us officially.

We feel that it has been computed on the basis of $56 per barrel of oil sold by ONGC and Oil India and then it has been distributed, this amount has been distributed among three companies, ONGC, Oil, and GAIL.

Analyst Okay.

Corporate Participant So, now with that derived figure, we have got 58.61 per barrel. So, now fourth quarter we don't know whether they will go had with the same formula or come back with some other thing. I am not very sure.

Analyst Okay. Thank you, sir. My next question is what is the share of upstream companies subsidiary burden you are expecting in Q4, considering that the government is planning to cap at 39% for the full year, FY 2012?

Corporate Participant

No, we can't comment on that in fact. I have already conveyed that this happens to be now this first three quarter, this percentage is coming about out of the total, our share of the -- company is about 37.9% this is a figure only, you can compute it. Now what share government will maintain, so that will only time will, we can't, we don't have any confirmation of this figure. Whatever guess we make, it will as good as you get.

Analyst Thank you. The third question is can you just give me the update on full year guidance for the OVLs production for 2012, FY2012?

Corporate Participant Yeah. I just mentioned the, for the current year?

Analyst Yeah. For the current year, full year, for the current year.

Corporate Participant Okay. Right now we are having those numbers are not, --. In fact like our MOU target is between 8.75 to 9. And I think we will be somewhere between these same numbers only. And so for nine months, you are asking about nine months?

Analyst Yeah, both nine months in terms of oil and gas as well as for 12 months for oil and gas.

Corporate Participant Okay. So for nine months figure we are concerned, it is 6.741.

Analyst Okay.

Corporate Participant And the expectations for the whole year is we will be in the range of between 8.75 and 9.

Analyst Okay. How much are you expecting for oil sir?

Corporate Participant You can make calculation out of this because nine months number is for oil 4.923 Okay.

Corporate Participant And gas is 1.81.

Analyst Okay. Thank you. Thank you very much.

Operator Thank you Kiran.

Corporate Participant Varun we can take one last question. We are already more than 60 minutes now.

Operator Alright sir. Participants, thank you. The last question is from Ballabh Modani from Religare Capital Market. Ballabh your line is unmuted. Please go ahead.

Ballabh Modani Hello. Yeah, I have just got sir couple of questions. One is what's your guidance for Venezuela, when that block is coming into production? That is one. The second one is out of your APM gas, what's the quantum of APM gas in your production from own feeds?

Corporate Participant So far Venezuela is concerned we are planning to have early production in December 2012 which will be in the range of 20,000 barrel per day.

Ballabh Modani Okay. And sir how you see that ramp up taking place there?

Corporate Participant It will be ramping over a period of time and the peek production in this field is likely to be in the range of 400,000 barrel per day. But that will happen sometime in 2016-'17. Okay, fine. And sir about the APM gas portion --.

Corporate Participant About APM gas

Corporate Participant APM what is quantity, quantity of APM gas.

Corporate Participant Most entirely it is APM gas alone. We have some numbers?

Corporate Participant Yes, I mean the total production is in fact largely from the nomination acreage.

Ballabh Modani Okay. Because the ratio is like I think lot of like the production from CCDs and whatever the new fields obviously you are getting a higher realization. So I just want to understand how much is in from the old fields. So basically the nomination fields how much production is coming from the nomination fields?

Corporate Participant I've told you, it's almost entirely coming from there. What will happen is for the marginal fields is where you would expect these new prices to crop up, but in terms of how much they would be you could just say that if we have about 25 BCM of annual production as we know today, you might have something in the region of about one to two, that's about the maximum that will ever happen.

Ballabh Modani Okay, fine.

Corporate Participant So that's the kind of percentage that you would see.

Ballabh Modani Okay. Thanks so much. Thank you, Ballabh. Participants, thank you for your participation in question-and-answer session. I would like to hand over the floor back to speakers for final remarks. Over to you, sir.

Corporate Participant Thank you very much, Varun. We thank all the people who are online, who has participated into ONGC con-call. And I think all my team members including Director of Exploration, Director of Finance Mr. Banerjee --. Thank you very much.

Operator Thank you. Participants that does concludes our conference call for today. Thank you for your participation. You may all disconnect now. Thank you.