Speaking to CNBC-TV18 on the issue, TK Ananth Kumar, director-Finance, Oil India says the company reported terrible loss due to fall in net realisation and crude production.
"The subsidy burden this quarter at 60 percent has been the record that we have borne till date. We have shown our concern to the government," he says in an interview to CNBC-TV18.
According to Kumar, the company has taken up the issue that this kind of burden on upstream companies will not be sustainable with the government and also with Kirit Parikh, who is heading the oil committee. If Oil India's matters are addressed, the company hopes for some improvement in the next nine months, he adds.
Below is the verbatim transcript of Kumar's interview on CNBC-TV18
Q: What led to such a big decline in the numbers year-on-year?
A: The crude gross price realisation has come down from USD 109 per barrel to USD 101 per barrel. This has impacted the net realisation because we had to pay USD 56/barrel as subsidy as we paid last year. So, despite the reduction in gross realisation, the subsidy burden was kept at the same level which impacted our net realisation by USD 9. Apart from that, there has been a fall in crude oil production by 5 percent. Although gas volume has showed a 5 percent increase, crude production has come down by 5 percent.
Q: You did net realisation of USD 44-45/barrel, what is your outlook because this can lead to de-rating?
A: Yes about USD 44-45/barrel. We have taken up with the government that this kind of burden on upstream will not be sustainable and we have also presented to Kirit Parikh Committee. So, we are hoping for some improvement in the next nine months.
Q: Are you worried that upstream companies will not get benefit of a substantial cut in under recoveries, something that was corroborated in Q1?
A: The subsidy burden this quarter at 60 percent has been the record subsidy we have borne till date. We have shown our concern to the government. We have made representation to the ministry of petroleum. We are hopeful that our concern would be addressed and in the next nine months and there would be some improvement.
Q: On the flip side, the positives that have seen are tailwinds from currency depreciation. How much did it help this quarter itself?
A: The rupee-dollar exchange rate was 55 in Q1 as compared to 54 in the corresponding quarter. So, there has been a marginal improvement in the realisation on account of the foreign exchange conversion but nothing significant.
Q: The production drop would worry investors, what is the outlook?
A: We are slightly concerned about the loss in production but are quite happy that the gas volumes have gone up by 5 percent. We are introducing new technology, horizontal drilling and other related improvements so that the production can grow from now onwards.
Q: Crude production remains a big worry as that came out of nowhere?
A: We are also concerned about the fall in crude production which is being addressed and are hopeful that in the next months to come, we will be able to improve the production. However, the guidance of 3.95, we may fall short to some extent.
Q: Any progress on Mozambique asset purchase?
A: We are gearing up to raise foreign currency debt for funding our Mozambique acquisition. We have already got Mozambique government approval and are waiting for our government approval so that transaction can be completed.
Q: Does it not worry you that you will be raising foreign debt in a depreciating rupee environment?
A: We will be raising offshore funds so there will be no rupee dollar exchange impact because we will be paying through offshore funds directly to the seller. We will also be generating dollar revenue from the acquisition.
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