The Facts v/s. Myths — a funny discussion on India’s National Oil Company

Jay Jani
Jay Jani
Jul 30, 2017 · 3 min read

It was middle of May in Mehsana, Gujarat. Scorching sun had already melted the spirits of many. As the lunch time began, employees started gathering into the canteen. And suddenly a heated discussion began at a corner table.

“The fall in crude oil prices has spiralled our lives into a pit. The company is losing the profits, stocks are plunging, and look — our allowances are continuously reducing” — said Dubey, a reservoir engineer. Others nodded in unison. Raghav, a drilling engineer added — “So true. See, even the quality of poha has deteriorated. They served it far better last year.” Now, the discussion took a serious turn. Even the poha couldn’t manage to survive the downfall of crude oil prices.

But while they reached discussing the impact of global oil prices on India, Shanky, a production engineer walked across. His eyes immediately bludgeoned when he heard the oil price conundrum. He dragged an extra chair and placed besides the discussion table. It was not clear though whether the discussion brought the gadget glued guy to the table or the soothing cool air of the air conditioner placed above. Whatever the reason, Shanky soon hopped onto the discussion.

He said “Yes, the oil prices have fallen by over 70% in last eight years. The rig count has taken a hit and so have many of the oilfield companies. But, the scene isn’t that bad for us. Despite the mighty fall, our net profit has reduced by only 40%.” Immediately Dubey interrupted — “Does 40% seem to be a small number to you??”

“Definitely, no!” — said Shanky. “But, it is significantly less compared to the dip witnessed by private oil companies. The reduced subsidy burden on our company has really helped us manage the funds better. In fact, the revenues of the company have nearly remained flat. This has been made possible by the reduced expenditure on exploration. Our debt ratio still remains close to zero.”

This time Raghav said in a gibberish way — “Don’t you feel the poha has gone bad?”. Shanky replied — “Might be, but that has nothing to do with the falling crude and does not indicate a gloomy outlook for the company. Look, ONGC’s return on asset shows a rising trend, clearly portraying that the company is managing its resources well. With the concurrent reduction in inventory, we have achieved good inventory turnover ratios. Combine all these with the excellent current ratio and our company is well placed to battle the challenges ahead. In fact the aggressive utilization of low service cost has enabled us to accelerate the growth.”

Return on Asset of ONGC

“Those numbers are all fine. But, we all know the stocks have taken a hit” — Dubey added.

Shanky — “Well, Warren Buffet said — The stock market is a wonderfully efficient mechanism for transferring money from the impatient to the patient. Let’s have some patience and the fortunes will revert.”

The facts and figures startled others. All the people on the table were still reluctant to believe what Shanky uttered because Shanky was a Production Engineer. And most people in the oilfield know that Production Engineers are bigger manipulators of data than the stock analysts. But one thing that Shanky did was to teach others the art of critical reasoning. Suddenly the people around realized his comprehensive analytical ability. He was no more a nerdy guy engrossed in the world of Harry Potter!

Let us discuss and debate on the basis of facts than myths.

Written by

Jay Jani

Jay is a Production Engineer working in India's National Oil Company - ONGC. Loves energy, environment, technology, books, travelling and public speaking.

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