India's top oil and gas producer ONGC booked a Rs 1,238-crore impairment loss, which together with a fall in prices led to a 55 per cent drop in the company's September quarter net profit.
Standalone net profit at Rs 2,878 crore in July-September quarter was 54.6 per cent lower than Rs 6,336 crore net profit a year ago, the company said in a statement.
Revenue dropped 31 per cent to Rs 16,917 crore.
The company got USD 41.38 for every barrel of crude oil it produced and sold in the second quarter of the current fiscal. This was 31.4 per cent lower than USD 60.33 per barrel price it had got in July-September 2019.
Gas price was also down by more than one-third to USD 2.39 per million British thermal unit.
"The revenue and profit-after-tax (PAT) for Q2 and H1 of FY'21 have declined as compared to corresponding period of FY'20 mainly due to lower crude oil price realisation. Lower gas prices also contributed to lower topline and bottomline," it said.
Oil and Natural Gas Corp (ONGC) recognized "an exceptional item towards impairment loss of Rs 1,238 crore in Q2 FY'21 to factor into estimated future crude oil and natural gas prices," the statement said.
An impairment loss is a recognised reduction in the carrying amount of an asset that is triggered by a decline in its fair value.
The company said it considered possible effects of low crude oil and natural gas prices on the recoverability of its cash generating units in accordance with Indian Accounting Standards (Ind AS).
It also considered the business conditions to make an assessment of the implication of pandemic, estimate of future crude oil and natural gas prices, production, and reserves volumes.
In January-March quarter, ONGC had booked an impairment loss of Rs 4,899 crore, which led to the firm reporting its first-ever quarterly loss of Rs 3,098 crore.
"This impairment loss (of Q2 FY'21) may be reversed in future as and when there is an increase in crude oil and gas price," ONGC said.
However, net profit for July-September was 480 per cent higher than Rs 496 crore net profit in Q1 FY'21 due to recovery in crude oil prices.
Crude oil production was marginally higher at 4.81 million tonnes in July-September as compared to 4.78 million tonnes in the corresponding period of previous fiscal.
Natural gas output fell to 5.7 billion cubic metres (bcm) from 5.9 bcm in July-September 2019 after demand fell due to the COVID-19-induced lockdown.
During April-September (H1), net profit fell 72.6 per cent to Rs 3,374 crore. Revenue slumped 41.4 per cent to Rs 29,927 crore.