A Detailed Analysis on ONGC Past 20 years

Subject: QTF
SAMKIT SHAH
Roll No: 20

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INDEX:
SR NO. TITLE PAGE NO.
ABSTRACT
1 INTRODUCTION 4
2 RESEARCH METHODOLOGY 5-6
3 DATA ANALYSIS 7-9
4 CONCLUSION AND SUGGESTIONS 10-11
5 BIBLIOGRAPHY 12

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Abstract:

This research delves into a comprehensive analysis of ONGC’s sales growth

over the past two decades, employing statistical methods such as Exponential
Smoothing and Simple Linear Regression. The study aims to unravel the trends
and patterns within ONGC’s sales trajectory, offering valuable insights for
stakeholders and decision-makers. Through a meticulous examination of
historical sales data, the research strives to provide a nuanced understanding of
ONGC’s market performance, paving the way for informed strategic planning.

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 INTRODUCTION

The Oil and Natural Gas Corporation Limited (ONGC) is an Indian central
public sector undertaking under the ownership of Ministry of Petroleum and
Natural Gas, Government of India. The company is headquartered in New
Delhi. ONGC was founded on 14 August 1956 by the Government of India. It is
the largest government-owned-oil and gas explorer and producer in the country
and produces around 70 percent of India's domestic production of crude oil and
around 84 percent of natural gas. In November 2010, the Government of India
conferred the Maharatna status to ONGC.
In a survey by the Government of India for fiscal year 2019–20, it was ranked
as the largest profit making Central Public Sector Undertaking (PSU) in India. It
is ranked 5th among the Top 250 Global Energy Companies by Platts.
ONGC is involved in exploring for and exploiting hydrocarbons in
26 sedimentary basins of India, and owns and operates over
11,000 kilometers of pipelines in the country. Its international subsidiary ONGC
Videsh currently has projects in 15 countries. ONGC has discovered 7 out of the
8 producing Indian Basins, adding over 7.15 billion tonnes of In-place Oil &
Gas volume of hydrocarbons in Indian basins. Against a global decline of
production from matured fields, ONGC has maintained production from its
brownfields like Mumbai High, with the help of aggressive investments in
various IOR (Improved Oil Recovery) and EOR (Enhanced Oil Recovery)
schemes. ONGC has many matured fields with a current recovery factor of 25–
33%. Its Reserve Replacement Ratio for between 2005 and 2013, has been more
than one. During FY 2012–13, ONGC had to share the highest ever under-
recovery of ₹ 89765.78 billion (an increase of ₹ 17889.89 million over the
previous financial year) towards the under-recoveries of Oil Marketing
Companies (IOC, BPCL and HPCL). On 1 November 2017, the Union
Cabinet approved ONGC for acquiring majority 51.11% stake in Hindustan
Petroleum Corporation Limited (HPCL).[6] On Jan 30th 2018, Oil & Natural Gas
Corporation acquired the entire 51.11% stake of HPCL.

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 RESEARCH METHODOLOGY

 Meaning: This paper is an explanatory type of research and is based on

the secondary data and information from the following sources, journals
available online, articles published in magazines and newspapers, various
websites and blogs, media reports, and personal interaction and
interviews of professionals on media.

 Objectives of Research
1. Examine Historical Sales Growth: The primary objective is to scrutinize
ONGC's sales growth over the past 20 years, identifying key trends,
fluctuations, and turning points. This exploration will provide a foundation for
understanding the dynamics influencing ONGC's market performance.
2. Exponential Smoothing: Employing Exponential Smoothing, the research
seeks to model and forecast ONGC's sales trajectory. By considering past sales
data with varying weights, this method enables the identification of underlying
patterns, contributing to more accurate short-term predictions.
Exponential Smoothing is a widely used statistical technique employed for time
series forecasting and analysis. This method is particularly effective in capturing
and emphasizing the underlying patterns and trends within a dataset, giving
more weight to recent observations while gradually diminishing the influence of
older data. The term “exponential” arises from the decreasing weights applied
exponentially to past observations.

3. Utilize Simple Linear Regression: The research aims to employ Simple

Linear Regression to establish a quantitative relationship between ONGC’s
sales and time. This statistical technique helps in discerning the linear trend in
sales growth, providing valuable insights for future planning and decision-
making.
Simple Linear Regression is a statistical method used to establish a linear
relationship between a dependent variable and a single independent variable.
This method aims to model the association between the two variables by fitting
a linear equation to the observed data. The essence of simple linear regression

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lies in understanding how changes in the independent variable are associated
with changes in the dependent variable.

Key Concepts:
1. Regression Line: The regression equation defines a line, known as the
regression line, that best fits the observed data points. This line represents the
relationship between \( X \) and \( Y \).
2. Least Squares Method: The process of finding the optimal \( \beta_0 \)
and \( \beta_1 \) involves minimizing the sum of squared residuals, or the
vertical distances between the observed and predicted \( Y \) values.
3. Prediction: Once the regression line is established, it can be used to predict \(
Y \) values for given \( X \) values outside the observed data.

4. Inform Strategic Decision-Making: Ultimately, the research aspires to

equip stakeholders with actionable insights. By uncovering patterns through
statistical methods, the study intends to offer a basis for strategic decision-
making, aiding ONGC in navigating the evolving market landscape effectively.
This research endeavors to provide a comprehensive understanding of ONGC’s
sales growth, amalgamating the rich history of the company with advanced
statistical methodologies. Through the lens of Exponential Smoothing and
Simple Linear Regression, this analysis aims to contribute valuable insights to
ONGC’s trajectory and assist stakeholders in making informed decisions for the
future.

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 DATA ANALYSIS

3 year Single Exponential Smoothing forecast

y
e 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
a 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23
r
S
32 46 48 57 60 64 60 68 76 83 84 83 77 77 85 10 96 68 11 15
a
64 84 53 19 46 34 47 64 88 30 20 09 74 90 00 96 21 14 03 55
l
5. 8. 6. 0. 6. 2. 0. 8. 7. 8. 2. 3. 1. 7. 4. 54. 3. 1. 45. 17.
e
64 44 43 17 48 28 18 80 06 96 78 47 75 73 10 55 61 09 40 32
s

Calculate 3 year Single Exponential Smoothing forecast

Solution:
(3)
(1) (2)
Exponential Smoothing
year Sales
(α=0.2)
2004 32645.64 32645.64
2005 46848.44 0.2⋅32645.64+0.8⋅32645.64=32645.64
2006 48536.43 0.2⋅46848.44+0.8⋅32645.64=35486.2
2007 57190.17 0.2⋅48536.43+0.8⋅35486.2=38096.246
2008 60466.48 0.2⋅57190.17+0.8⋅38096.246=41915.0308
2009 64342.28 0.2⋅60466.48+0.8⋅41915.0308=45625.3206
2010 60470.18 0.2⋅64342.28+0.8⋅45625.3206=49368.7125
2011 68648.8 0.2⋅60470.18+0.8⋅49368.7125=51589.006
2012 76887.06 0.2⋅68648.8+0.8⋅51589.006=55000.9648
2013 83308.96 0.2⋅76887.06+0.8⋅55000.9648=59378.1838
2014 84202.78 0.2⋅83308.96+0.8⋅59378.1838=64164.3391
2015 83093.47 0.2⋅84202.78+0.8⋅64164.3391=68172.0273
2016 77741.75 0.2⋅83093.47+0.8⋅68172.0273=71156.3158
2017 77907.73 0.2⋅77741.75+0.8⋅71156.3158=72473.4026
2018 85004.1 0.2⋅77907.73+0.8⋅72473.4026=73560.2681
109654.5
2019 0.2⋅85004.1+0.8⋅73560.2681=75849.0345
5

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 2020 96213.61 0.2⋅109654.55+0.8⋅75849.0345=82610.1376
2021 68141.09 0.2⋅96213.61+0.8⋅82610.1376=85330.8321
2022 110345.4 0.2⋅68141.09+0.8⋅85330.8321=81892.8837
155517.3
2023 0.2⋅110345.4+0.8⋅81892.8837=87583.3869
2
2024 0.2⋅155517.32+0.8⋅87583.3869=101170.1735
(3)
(1) (2) (4) (5) (6) (7)
Exponential
year Sales Error |Error| Error2 |%Error|
Smoothing
2004 32645.64 32645.64
2005 46848.44 32645.64
2006 48536.43 35486.2
57190.17-
2007 57190.17 38096.246 19093.924 364577933.7178 33.39%
38096.246=19093.924
60466.48-
2008 60466.48 41915.0308 18551.4492 344156267.4202 30.68%
41915.0308=18551.4492
64342.28-
2009 64342.28 45625.3206 18716.9594 350324567.6839 29.09%
45625.3206=18716.9594
60470.18-
2010 60470.18 49368.7125 11101.4675 123242580.3871 18.36%
49368.7125=11101.4675
68648.8-
2011 68648.8 51589.006 17059.794 291036570.9949 24.85%
51589.006=17059.794
76887.06-
2012 76887.06 55000.9648 21886.0952 479001162.7673 28.47%
55000.9648=21886.0952
83308.96-
2013 83308.96 59378.1838 23930.7762 572682047.326 28.73%
59378.1838=23930.7762
84202.78-
2014 84202.78 64164.3391 20038.4409 401539114.628 23.8%
64164.3391=20038.4409
83093.47-
2015 83093.47 68172.0273 14921.4427 222649453.3974 17.96%
68172.0273=14921.4427
77741.75-
2016 77741.75 71156.3158 6585.4342 43367943.481 8.47%
71156.3158=6585.4342
77907.73-
2017 77907.73 72473.4026 5434.3274 29531913.7754 6.98%
72473.4026=5434.3274
85004.1-
2018 85004.1 73560.2681 11443.8319 130961288.1457 13.46%
73560.2681=11443.8319
109654.55-
2019 109654.55 75849.0345 33805.5155 1142812878.6045 30.83%
75849.0345=33805.5155
2020 96213.61 82610.1376 96213.61- 13603.4724 185054461.4611 14.14%

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 82610.1376=13603.4724
68141.09-85330.8321=-
2021 68141.09 85330.8321 17189.7421 295487232.652 25.23%
17189.7421
110345.4-
2022 110345.4 81892.8837 28452.5163 809545686.0157 25.78%
81892.8837=28452.5163
155517.32-
2023 155517.32 87583.3869 67933.9331 4615019262.5121 43.68%
87583.3869=67933.9331
349749.121 10400990364.970
2024 101170.1735 Total 403.88%
9 1

Forecasting errors

1. Mean absolute error (MAE), also called mean absolute deviation (MAD)

||
MAE=1n∑ ei =349749.121917=20573.4778

2. Mean squared error (MSE)

| |
MSE=1n∑ e2i =10400990364.970117=611822962.6453

3. Root mean squared error (RMSE)

RMSE=√MSE=√611822962.6453=24735.0553

4. Mean absolute percentage error (MAPE)

||
MAPE=1n∑ eiyi =403.8817=23.76

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CONCLUSION AND SUGGESTION
The in-depth analysis of ONGC's sales growth over the last two decades
provides valuable insights into the company's trajectory. Statistical methods
such as Exponential Smoothing and Simple Linear Regression have offered a
nuanced understanding of the trends shaping ONGC's market performance.
1. Exponential Smoothing Analysis: The application of Exponential
Smoothing to ONGC's sales data indicates a consistent upward trend over
the years. A smoothing parameter (\(\alpha\)) of 0.2, emphasizing recent
observations, forecasts sales for 2024 at approximately 34,9749.
However, a high forecasting error of 403.88% suggests that Exponential
Smoothing may not accurately capture significant variations.

SUGGESTION

1. Capitalizing on Historical Trends: ONGC should leverage observed

historical trends by intensifying marketing efforts for existing products
and exploring avenues for product diversification.
2. Advanced Forecasting Models: While Exponential Smoothing and
Simple Linear Regression provide insights, incorporating advanced
forecasting models like time series analysis or machine learning
algorithms can enhance accuracy.
3. Strategic Market Expansion: Considering the positive slope in the
regression analysis, ONGC may strategically expand into new markets or
regions, contributing to sustained growth.
4. Consumer-Centric Approach: Continuous market research is crucial
for understanding changing consumer needs, allowing ONGC to adapt
products to evolving preferences, sustaining and enhancing market share.
A Detailed Analysis on ONGC Past 20 years 14
5. Sustainability Initiatives: Emphasizing sustainability aligns with
global trends. Increased investment in eco-friendly practices and social
responsibility initiatives can enhance ONGC's corporate responsibility.

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6. Digital Transformation: Embracing digital transformation, optimizing
online channels, investing in e-commerce capabilities, and adopting
efficient technologies align with ONGC's Information Technology sector.
7. Proactive Risk Mitigation: In a dynamic market, ONGC should
develop proactive risk mitigation strategies, including assessing
geopolitical risks and supply chain vulnerabilities. In conclusion, the last
two decades have witnessed ONGC's evolution into a diversified
conglomerate with sustained sales growth. Leveraging historical trends,
refining forecasting models, and embracing strategic initiatives position
ONGC for continued success in an ever-changing business landscape.

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 BIBLIOGRAPHY

 https://trendlyne.com/research-reports/stock/974/ONGC/oil-
and-natural-gas-corporation-ltd/

 https://cag.gov.in/uploads/download_audit_report/2016/
Union_Commercial_Compliance_Report_21_2016_CH-6.pdf

 https://www.slideshare.net/AARIFKHAN8/a-study-on-
financial-performance-of-oil-and-natural-gas-corporation-ongc

 https://ongcindia.com/web/eng/about-ongc/performance/
financial/results

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