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Oil and Natural Gas Corporation Ltd

ONGC’s increased earnings forecast over the next 12-18 months will aid in deleveraging

The rating agency has raised its Brent crude oil price forecast for the rest of 2021 to $65 per barrel, up from $60 per barrel before.

Standard & Poor’s stated on Tuesday that the better earnings outlook for state-owned Oil and Natural Gas Corporation Ltd (ONGC) over the next 12-18 months will support deleveraging.

“We anticipate that the India-based firm would benefit from favourable crude oil prices during FY22 (the fiscal year ending March 31, 2022),” S&P said in a statement.

“It has a rating of “BBB-/Stable.” Our ‘BBB-‘ issuer credit rating on ONGC is nonetheless restricted by India’s sovereign credit rating (BBB-/Stable/A-3) “The agency went on to say

The rating agency has raised its Brent crude oil price forecast for the remainder of 2021 to $65 per barrel from $60 per barrel before. This projection is substantially higher than the $43 per barrel realised by ONGC in FY21.

Higher crude prices, along with a small 5-7% increase in production output, could boost the company’s EBITDA by 20-25% to over Rs 85,000 crore in FY22.

“We anticipate the company’s debt-to-EBITDA ratio would improve to around 1.6x throughout this time, up from around 1.9x in FY21,” the agency noted.

Higher crude prices, along with a small 5-7% increase in production output, could boost the company’s EBITDA by 20-25% to over Rs 85,000 crore in FY22.

“We anticipate the company’s debt-to-EBITDA ratio would improve to around 1.6x throughout this time, up from around 1.9x in FY21,” the agency noted.

ONGC would continue to make prudent capital investments in FY22, which will be primarily financed by operational cash flows. Despite the obstacles posed by the Covid-19 epidemic, the business demonstrated good flexibility in reducing spending throughout FY21. Its capital spending decreased to almost Rs 43,000 crore in FY21, down from over Rs 55,000 crore the previous year.

“The cushion in ONGC’s stand-alone credit profile (SACP) assessment of bbb+ has grown. The company’s increased profits and capital-spending flexibility could lift its funds-from-operations-to-debt ratio above 50% over the next 12-18 months, up from around 45 percent in FY21. This is far higher than our 40% criterion for a lower SACP “According to the agency.