Oil and Natural Gas Corporation

Financial Statements For Oil & Natural Gas Corp Ltd (ONGC)

Year over year, Oil and Natural Gas Corp. Ltd. has been able to grow revenues from 1.0T to 1.2T. Most impressively, the company has been able to reduce the percentage of sales devoted to income tax expense from 10.53% to 9.77%. This was a driver that led to a bottom line growth from 194.0B to 224.6B.

Income StatementBalance SheetCash Flow

Currency in Millions of Indian Rupees
Revenues Other Revenues Total Revenues Cost Of Goods Sold Gross Profit Selling General & Admin Expenses, Total R&D Expenses Depreciation & Amortization, Total Other Operating Expenses Other Operating Expenses, Total Operating Income Interest Expense Interest And Investment Income Net Interest Expense Income (Loss) On Equity Investments Currency Exchange Gains (Loss) Other Non-Operating Income (Expenses) Ebt, Excluding Unusual Items Gain (Loss) On Sale Of Investments Gain (Loss) On Sale Of Assets Other Unusual Items, Total Insurance Settlements Other Unusual Items As of: Mar 31 2008 Reclassified INR 967,821.8 7,352.2 975,173.9 442,945.4 532,228.5 36,524.4 1,753.3 138,808.1 73,041.8 250,127.5 282,101.0 -1,135.2 28,499.5 27,364.2 20.5 -1,017.5 553.1 309,021.4 10.9 -48.8 247.8 -317.5 Mar 31 2009 Restated INR 1,045,883.9 6,872.8 1,052,756.6 481,300.6 571,456.1 29,618.6 1,574.4 155,117.1 88,253.1 274,563.2 296,892.9 -1,528.6 35,332.6 33,804.0 98.8 -11,715.9 -10,231.4 308,848.4 3.9 -92.0 3,033.5 657.7 1,562.5 Mar 31 2010 Restated INR 1,017,545.7 9,110.1 1,026,655.8 459,873.0 566,782.8 35,911.9 1,985.8 186,818.0 69,655.8 294,371.4 272,411.3 -1,772.0 21,302.7 19,530.7 78.1 10,651.2 948.1 303,619.5 0.6 -71.6 943.3 -1,313.6 Mar 31 2011 INR 1,176,151.3 25,803.8 1,201,955.1 552,501.3 649,453.8 40,355.4 3,582.4 205,258.0 73,083.1 322,279.0 327,174.8 -4,106.8 24,393.4 20,286.5 30.0 1,170.7 -5,076.3 343,585.7 0.6 -7.8 -385.2 -620.1 4 Year Trend

Ebt, Including Unusual Items Income Tax Expense Minority Interest In Earnings Earnings From Continuing Operations Net Income Net Income To Common Including Extra Items Net Income To Common Excluding Extra Items

309,231.2 106,999.5 -3,509.1 202,231.8 198,722.6 198,722.6 198,722.6

311,793.7 110,093.4 -3,746.9 201,700.3 197,953.4 197,953.4 197,953.4

304,491.8 107,137.9 -3,318.5 197,353.9 194,035.3 194,035.3 194,035.3

343,193.2 114,913.4 -3,720.4 228,279.7 224,559.3 224,559.3 224,559.3

Directors Report
Production Company in the World and 18th in the overall listing of global energy companies per Platts Top 250 Global Energy Company Ranking 2010 (November, 2010) ONGC has been ranked at 172nd position in Forbes Global 2000 list 2011 of worlds biggest companies for 2011 (April, 2011). It has retained the number one rank among Indian companies and has been ranked at second position in Financial Express FE500 listing of Indian companies both in terms of Net Worth and Overall Composite Ranking. Reserve Accretion and RRR

Your Company accreted 236.92 million metric tonnes of oil equivalent (MMTOE) of In-place volume of hydrocarbon in domestic basins (operated by ONGC). The ultimate reserves accretion has been 83.56 MMTOE which surpassed the record breaking performance of 82.98 MMTOE in FY''10 and is the highest in last two decades. Total reserve accretion in domestic basins has been 83.85 MMTOE [including 0.29 MMTOE from ONGCs share in Joint Ventures (JVs)]. This fiscal also your Company maintained Reserve Replacement Ratio (RRR) more than one with RRR of 1.76 (with 3P reserves)

New Projects
The Board of your Company approved development of four discovered fields i.e, SB-14, WO series fields, BHE and BH-35 fields in FY11 with an investment of Rs. 29,334 million. Besides that infrastructure renewal project for three western onshore assets i.e., Ankleshwar, Ahmedabad and Mehsana was also approved with an investment ofRs. 79,287 million.Oil and gas fields in these assets have been on stream for more than 30 years and as such the infrastructure required renewal.

New Sources of Energy

Shale gas

Your company created a landmark in the history of India for exploration of unconventional hydrocarbons, when gas flowed out from the Barren Measure shale at a depth of around 1,700 m in its first Research & Development well RNSG-1 at Icchapur, near Durgapur, West Bengal on 25th Jan 2011. This breakthrough has encouraged your Company to venture into many shale sequences in well explored Cambay, KG, Cauvery and Assam-Arakan Basins for exploitation of Shale Gas

1. Financial Results
Inspite of fluctuating crude prices and increased burden of its share of under-recovery on account of the losses suffered by the Oil Marketing Companes, your Company has earned a Profit After Tax of Rs. 189,240 million (Rs. 167,676 million in 2009-10), up 12.86 %, which is incidentally the highest-ever During the year under review, your Company registered Gross revenue ofRs. 695,322 million (Rs.619,832 million in 2009-10), up 12.18%.

Highlights: Gross Revenue: X 695,322 million Profit After Tax (PAT): X 189,240 million Contribution to Exchequer: ^ 317,759 million*

Return on Capital Employed 51.6 % Debt-Equity Ratio 0.00 Earning Per Share (Rs.) 22.12** Book Value Per Share (Rs.) 113** *OID Cess, Excise duty, Royalty, Corporate and Dividend Distribution Tax, Sales Tax / VAT and Dividend on Government shareholding. **After considering split and bonus issue

Financial Results

(Rs. in million)
2010-11 2009-10 619,832 396,054

Gross Revenue Gross Profit Less:Interest Exchange Variation Depreciation Amortisation Depletion Impairment Provision/Write Offs Provision for Taxation 251 14 20,006 83,698 54,374 1,352 6,114 86,950

695,322 441,999

686 (4,033) 12,312 89,407 45,302 (433) 2,974 252,759 82,163 228,378

(including deferred tax liability of Rs. 11,160 million) Profit After Tax Appropriations Interim Dividend Proposed Final Dividend Tax on Dividend Transfer to General Reserve Total 68,444 6,417 12,156 102,223 189,240 38,500 32,083 11,616 85,477 167,676 189,240 167,676

Previous year figures have been regrouped wherever necessary

2. Dividend
Your Company paid an interim dividend oR32 per share (320%), in December 2010. The Board of Directors have recommended a final dividend ofRs. 0.75 per share (15%) which is after considering split and bonus issue during the year. This makes the aggregate dividend at Rs. 35 per share (350% before considering split and bonus as compared to Rs. 33 per share (330%) paid in 2009-10. The total dividend will absorb Rs. 74,861 million, besides 112,156 million as tax on dividend, which is historically the highest dividend payout by the Company.

3. Management Discussion and Analysis Report

In terms of Clause 49(IV)(F) of the Listing Agreement with the Stock Exchanges, a Management Discussion and Analysis Report h been included and forms part of the Annual Report of the Company.

4. Production and Sales

Highlights of production and sales of Crude Oil, Natural Gas and Value- added products: Unit Production 2010-11 Direct Crude Oil Natural Gas (MMT) *27.28 *26.46 **25.59 535 1105 1592 165 8 22.94 20.29 387 1057 1600 118 14 22.33 448,645 20.60 127,544 533 1108 1598 166 2 8,796 18,369 56,342 679 527 475 445,040 73,797 10,249 21,924 47,137 3,255 52 411 2009-10 Sales Value (Rs. in million) 2009-10

2010-11 200910 2010-11

(BCM) **25.32 388 1054 1570 116 19

Ethane/Propane000 MT LPG Naphtha SKO ATF Others 000 MT 000 MT 000 MT 000 NT

Sub Total Trading Motor Spirit HSD Others Sub Total Total 000 KL 000 KL 0.63 3.27 0.55 4.29

661,377 601,865

36 134 2 172 661,549

27 156

183 602,048

* includes 2.86 MMT (Previous year 1.79 MMT) from Joint Ventures. ** includes 2.23 BCM (Previous year 2.49 BCM) from Joint Ventures.

5. Oil & Gas Reserves

Your Company has made voluntary disclosures in respect of Oil & Gas Reserves, conforming to SPE classification 1994 and US Financial Accounting Standards Board (FASB-69). ONGC has added 236.92 MMTOE of oil and oil-equivalent gas (O OEG) initial in-place volume with 83.56 MMTOE of O OEG as the ultimate reserve component during FY 11 in domestic fields (operated by ONGC). The ultimate reserves accretion, including its share in joint ventures is 83.85 MMTOE of O OEG, which is the highest in last two decades.
Ultimate Reserve (3P) accretion O OEG Year Domestic Assets ONGC''s share in Domestic JVs (2) 2.82 4.39 0.29 Total Domestic Reserve (3)=(1) (2) 71.72 87.37 83.85 (in MMTOE) OVL''s Total

(1) 2008-09 2009-10 2010-11 68.90 82.98 83.56

Share in Foreign Assets (4) (5)=(3) (4) 135.08 0.35 33.49 206.80 87.72 117.34

6. Statement of Reserve Recognition Accounting

The concept of Reserve Recognition Accounting attempts to recognize income at the point of discovery of reserves and seeks to demonstrate the intrinsic strength of an organization with reference to its future earning capacity in terms of current prices for income as well as

expenditure. This information is based on the estimated net proved reserves (developed and undeveloped) as determined by the Reserve Estimates Committee.

annual financial statements, the following supplemental information: (a)Proved Oil and Gas reserve quantities (b) Capitalized costs relating to Oil and Gas producing activities (c)Cost incurred for property acquisition, exploration and development activities (d) Results of operations for Oil and Gas producing activities (e) A standardized measure of discounted future net cash flows relating to proved Oil and Gas reserve quantities

7. Financial Accounting
The Financial Statements have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP) and in compliance with all applicable Accounting Standards (AS1 to AS-29) and Successful Efforts Method as per the Guidance Note on Accounting for Oil & Gas Producing Activities issued by Institute of Chartered Accountants of India (ICAI) and provisions of the Companies Act, 1956.

8.Joint Ventures/ Associates

(i)ONGC Tripura Power Company Limited (OTPC)

ONGC has promoted OTPC with envisaged equity stake of 50% along with Govt of Tripura (0.5%) and IL&FS (26%) to set-up 726.6 MW (2 x 363.3MW) gas based Combined Cycle Power Plant (CCPP) at Pallatana in Tripura to monetize idle gas assets in Tripura. The generation project is in advanced stage of implementation by Bharat Heavy Electricals Limited, which is engaged as the turnkey EPC agency. The financial closure of the project has earlier been achieved and

various linkages like gas supply from ONGC and power off-take by NE states has already been tied up. The JV Company is making all-outefforts to commission the project, being set up at a challenging location, as per schedule i.e. by March 2012. The total Capex commitment of the JV Company isRs.25,286 million and total expenditure is Rs.16,009 million till 31st May 2011.

(ii) ONGC Petro-additions Limited (OPaL) Your Company has promoted a JV company ONGC Petro-additions Limited (OPaL) with envisaged equity stake of 26% along with GAIL (17%) and Gujarat State Petroleum Corporation Ltd (GSPCL (5%) to implement a mega petrochemical complex comprising of 1.1 MMTPA ethylene Cracker and global scale polymer units within Dahej SEZ as a step towards downstream integration. Project implementation is in progress with major contracts, like Site Infrastructure Development, DFCU, LSTK for HDPE etc., already awarded. The total Capex commitment of the JV Company isRs.141,449 million and total expenditure isRs.56,380 million till 31st May 2011.

(iii) Mangalore Special Economic Zone Limited (MSEZ)

ONGC with envisaged equity stake of 26% in MSEZ along with KIADB (23%) and IEDCL KCCI (51%), is promoting another SEZ in coastal Mangalore.Ministry of Commerce & Industry has formally notified to set up a Petro-chemical Specific SEZ in 1630 acres of land. Total land in possession is 2317 acres out of which 542 acres has been allotted to OMPL, ISPRL etc. Resettlement and Rehabilitation work of Project Displaced Family (PDF) is in progress and Chief Minister of Karnataka has approved Comprehensive Action Plan for employment of PDF nominees of MSEZ Phase-I. The total Capex commitment of the JV Company is Rs. 7,799 million and total expenditure is Rs. 4,431 million till 31st May 2011.

(iv) ONGC Mangalore Petrochemicals Limited (OMPL)

ONGC has promoted OMPL with envisaged equity participation of 46%, along with MRPL (3%) for setting up manufacturing facilities for 0.92 MMTPA Para-Xylene and 0.14 MMTPA Benzene from MRPL''s aromatic streams in Mangalore SEZ as value addition project. Around 93.5% of

project cost has been awarded which includes major contracts relating to project management, technology licensor and LSTK contract for process packages etc. Project implementation is in full swing. The total Apex commitment of the JV Company is Rs. 43,335 million and total expenditure is Rs. 10,309 million till 31st May 2011.

(v) ONGC TERI Biotech Limited (OTBL)

OTBL is a Joint Venture company of ONGC, incorporated on 26th March, 2007, with The Energy Research Institute (TERI) with shareholding of 49% each and balance 2% equity is held by the Financial Institutions. The JV has been promoted for addressing the requirement of Bioremediation of oily sludge, Microbial Enhanced Oil Recovery, prevention of wax deposition in tubular and solution for other oil field problems. The turnover of OTBL in FY 2010-11 is Rs. 129.54 million and Profit after Tax is Rs. 27.48 million as against turnover of Rs. 73.8 million and PAT of Rs. 16.33 million in FY 2009-10.

9.Health, Safety & Environment (HSE)

- The year 2011 declared as - Year of Safety, Compliance & New Campaign. - Offshore Package Policy renewed for 2011-12 at US$ 27.7 million comparable to US$ 27.05 million, marginally increased considering volatile market due to Macondo blowout and earthquake in Japan. - 444 QHSE certification/ Recertification/ Surveillance audits for sustaining HSE accreditations carried out during FY11 against MOU target of 365 audits. - 283 HSE process safety audits carried out during FY11 against MOU target of 200.

10. Human Resource Development

ONGC caters to meeting the demands of maintaining a steady flow of talent, in a business which is characterized by high risks and uncertainties, enormous costs, fast changing level oftechnology,

physically challenging work environment fluctuate product prices and growing competition. a. Performance Management System and Performance Related Pay Your Company, in line with the DPE Guidelines is devising a robust performance management system which is effective in identifying and rewarding high performers. As part of the process, the performance appraisal system has been completely e- enabled. b. Training Skill upgradation is a vital component for the Human Resource Development. In pursuance to the mandate of equipping the executives with latest knowledge in the specialized fields of upstream oil and gas sector, attempts were made to organise training programs with the best of faculties from India and abroad.

11.Cost Audit
Pursuant to the directions of the Central Government for audit of Cost Accounts, the proposal for appointment of 7 firms of Cost Accountants as Cost Auditors for auditing the cost accounts of your Company for the year ended 31st March, 2011 was approved by the Central Government and they have accordingly been appointed.

12. Directors
During the year under report, Shri R. S. Sharma, former CMD and Shri D. K. Pande, former Director (Exploration) retired from the services of ONGC on 31 01.2011. Shri S. V. Rao was appointed as Director (Exploration), ONGC on 25.02.2011 and Shri K. S. Jamestin was appointed as Director (Human Resources) ONGC on 25.05.2011 Further, with a view to ensure that the Board structure of ONGC conforms to the provisions of Clause 49 of the Listing Agreement, the Government has appointed Dr D. Chandrasekharam (on 11.03.2011), Smt. Usha Thorat, Prof. Deepak Nayyar and Shri Arun Ramanathan (on 20.06 2011) as Non- official Parttime Directors on the Board of ONGC. As a result, the Company can now exercise its enhanced powers under the Maharatna dispensation.