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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.

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.


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