FUTURE ONGC Accounting Policy

1. Corporate information

Oil and Natural Gas Corporation Limited ( ONGC'''' or ‘the Company'''') is a public limited company domiciled and incorporated in India. The Company''''s shares are listed and traded on Stock Exchanges in India. The Company is engaged in exploration, development and production of crude oil and natural gas.

2. Significant Accounting Policies

a. Basis of preparation

The financial statements are prepared under the historical cost convention on accrual basis in accordance with the Generally Accepted Accounting Principles (GAAP) applicable in India, applying the Successful Efforts Method as per the Guidance Note on Accounting for Oil and Gas Producing Activities (Revised 2013) issued by the Institute of Chartered Accountants of India and the applicable Accounting Standards as prescribed under the provisions of the Companies Act, 2013 read with the Companies (Accounts) Rules. 2014.

As the operating cycle cannot be identified in normal course due to the special nature of industry, the same has been assumed to have duration of 12 months. Accordingly, all assets and liabilities have been classified as current or non-current as per the Company''''s operating cycle and other criteria set out in the Schedule III to the Companies Act. 2013. The financial statements are presented in Indian Rupees and all values are rounded off to the nearest million unless otherwise stated.

b. Use of Estimates

The preparation of financial statements requires estimates and assumptions which affect the reported amount of assets, liabilities, revenues and expenses of the reporting period. Management believes that these estimates and assumptions are reasonable and prudent. The difference between the actual results and estimates are recognized in the period in which the results are known or materialized.

c. Deferred Government Grant

Government Grant related to acquisition of Fixed Assets is treated as Deferred Government Grant'''' and an amount equal to proportionate depreciation of such assets is credited to Statement of Profit and Loss.

d. Fixed Assets

d.1 Tangible Assets

d.1.1 Fixed assets are stated at historical cost less accumulated depreciation and impairment. Fixed assets received as donations/gifts are capitalized at assessed values with corresponding credit taken to Capital Reserve. Parts of an item of fixed asset having different useful lives and material value are accounted for as separate components of the fixed asset.

d.1.2 All costs, net of applicable tax credits, relating to acquisition of fixed assets till the time of bringing the assets to working condition for intended use are capitalized.

d.2 Intangible Assets

Intangible assets are stated at cost of acquisition, net of applicable tax credits, less accumulated amortization and impairment.

e. Exploration, Development and Production Costs e.1 Pre-acquisition cost

Expenditure incurred before obtaining the right(s) to explore, develop and produce oil and gas are expensed as and when incurred.

e.2 Acquisition Cost

Acquisition costs of an oil and gas property are costs related to right to acquire mineral interest and are accounted as follows:-Exploration and Development stage:

Acquisition cost relating to projects under exploration or developments are initially accounted as exploration or developments wells in progress respectively. Such costs are capitalized by transferring to Oil & Gas Assets when a well is ready to commence commercial production. In case of abandonment/ relinquishment, such costs are written off.

Production stage:

Acquisition costs of a producing oil and gas property are capitalized as proved property acquisition cost under Oil & Gas Assets and amortized using the unit of production method over proved reserves of underlying asset.

e.3 Survey Cost

Cost of Survey and prospecting activities conducted in the search of oil and gas are expensed as exploration cost in the year in which these are incurred.

e.4 Exploratory Wells in Progress

e.4.1 All exploration costs incurred in drilling and equipping exploratory and appraisal wells, cost of drilling exploratory type stratigraphic test wells are initially capitalized as Exploratory Wells in Progress till the time these are either transferred to Oil & Gas Assets on completion as per note no.2.f.2 or expensed as exploration cost (including allocated depreciation) as and when determined to be dry or of no further use, as the case may be.

e.4.2 Costs of exploratory wells are not carried over unless it could be reasonably demonstrated that there are indications of sufficient quantity of reserves and sufficient progress is being made in assessing the reserves and the economic and operating viability of the project. All such carried over costs are subject to review for impairment as per note no.2.n.8.

e.5 Development Wells in Progress

All costs relating to Development Wells are initially capitalized as ‘Development Wells in Progress’ and transferred to ‘Oil & Gas Assets’ on ‘completion" as per note no.2.f.2.

f. Oil & Gas Assets

f.1 Oil & Gas Assets are stated at historical cost less accumulated depletion and impairment. These are created in respect of an area/field having proved developed oil and gas reserves, when the well in the area/field is ready to commence commercial production.

f.2 Cost of temporary occupation of land, successful exploratory wells, all development wells, depreciation on related equipment, facilities and estimated future abandonment costs are capitalized and reflected as Oil & Gas Assets.

g. Production Costs

Production costs include pre-well head and post well head expenses including depreciation and applicable operating costs of support equipment and facilities.

h. Sidetracking

h.1 In case of an exploratory well. Cost of Side-tracking is treated in the same manner as the cost incurred on a new exploratory well. The cost of abandoned portion of side tracked exploratory wells is expensed as Exploratory Well Cost written off.''''

h.2 In case of development wells, the entire cost of abandoned portion and side tracking is capitalized.

h.3 In case of Producing wells, if the side-tracking results in additional proved developed oil and gas reserves or increases the future economic benefits there from beyond previously assessed standard of performance, the cost incurred on side tracking is capitalized, whereas the cost of abandoned portion of the well is depleted in the normal way. Otherwise, the cost of side tracking is expensed as ''''Work over Expenditure.''''

I. Abandonment Cost

i.1 The full eventual estimated liability towards costs relating to dismantling, abandoning and restoring well sites and allied facilities are recognized in respective assets when the well is complete / facilities are installed. The abandonment cost on dry well is expensed as exploratory well cost.

1.2 Provision for abandonment cost is updated based on the technical assessment at current costs. The effects of changes resulting from revisions to estimated liability are adjusted to the carrying amount of the related Asset and considered for depletion on a prospective basis.

1.3 Provision for abandonment cost in respect of Jointly Controlled Assets is considered as per par titivating interest of the company on the basis of estimates approved by the respective Operating Committee. Wherever the same are not approved by the respective operating committee, abandonment cost estimates of the company as per i.2 above are considered.

j. Jointly Controlled Assets

The Company has Joint Ventures in the nature of Production Sharing Contracts (PSC) with the Government of India and various body corporate for exploration, development and production activities.

J.1 The company''''s share in the assets and liabilities along with attributable income and expenditure of the Jointly Controlled Assets is merged on line by line basis with the similar items in the Financial Statements of the Company and adjusted for depreciation, depletion, survey, dry wells, abandonment, impairment and sidetracking in accordance with the accounting policies of the Company.

j.2 Disposal of Interest

Gain or loss on sale of interest in a cost center, is recognized in the statement of profit and loss, except that no gain is recognized at the time of such sale if substantial uncertainty exists about the recovery of the costs applicable to the retained interest or if the company has substantial obligation for future performance. The gain in such situation is treated as recovery of cost related to that cost center.

j.3 The hydrocarbon reserves in such areas are taken in proportion to the participating interest of the Company.

k. Investments

Long-term investments are valued at cost. Provision is made for any diminution, other than temporary y. in the value of such investments.

Current Investments are valued at lower of cost and fair value.

I. Inventories

1.1 Finished goods (other than Sulphur) and stock in pipelines/tanks and carbon credits are valued at cost or net realizable value whichever is lower. Cost of finished goods is determined on absorption costing method. Sulphur is valued at net realizable value. The value of inventories includes excise duty, royalty (wherever applicable) but excludes Cess.

1.2 Crude oil in semi-finished condition at Group Gathering Stations is valued at cost on absorption costing method or net realizable value whichever is lower. Crude oil in unfinished condition in flow lines up to Group Gathering Stations/platform and Natural gas is not valued as it is not stored.

1.3 Inventory of stores and spare parts is valued at weighted average cost or net realizable value, whichever is lower. Provisions are made for obsolete and non-moving inventories.

1.4 Unserviceable and scrap items, when determined, are valued at estimated net realizable value.

m. Revenue Recognition

m.1 Revenue from sale of products is recognized on transfer of custody to customers.

m.2 Sale of crude oil and gas (net of levies) produced from Wells in Progress is deducted from expenditure on such wells.

m.3 Sales are inclusive of all statutory levies except Value Added Tax (VAT). Any retrospective revision in prices is accounted for in the year of such revision.

m.4 Revenue in respect of the following is recognized when there is a reasonable certainty regarding ultimate collection:

a. Short lifted quantity of gas

b. Surplus from Gas Pool Account

c. Interest on delayed realization from customers

d. Liquidated damages from contractors/ suppliers

m.5 Dividend income is recognized when right to receive is established. Interest income is recognized on time proportion basis taking into account the amount outstanding and rate applicable.

n. Depreciation, Depletion, Amortization and Impairment Depreciation

n.1 Depreciation on fixed assets (other than Oil & Gas assets) is provided for under the written down value method over the useful life of Asset as specified in Schedule II to the Companies Act. 2013 except in case of certain items of plant and equipment where useful life ranging from 3 to 25 years has been considered based on technical assessment by the management which is lower than the useful life prescribed under schedule II to the Companies Act 2013.

n.2 Depreciation on additions/deletions to fixed assets other than of Oil & Gas Assets during the year is provided on pro rata basis with reference to the date of additions/deletions except low value items not exceeding Rs, 5,000/- which are fully depreciated at the time of addition.

n.3 Depreciation on subsequent expenditure on fixed assets other than of Oil & Gas Assets arising on account of capital improvement or other factors is provided for prospectively over the remaining useful life.

n.4 Depreciation on refurbished/revamped assets other than of Oil & Gas Assets which are capitalized separately is provided for over the reassessed useful life, which is not more than the life specified in Schedule II to the Companies Act. 2013.

n.5 Depreciation on fixed assets (other than Oil & Gas assets) including support equipment and facilities used for exploratory/ development drilling is initially capitalized as part of drilling cost and expensed/depleted as stated in Note no. 2. f and

2.n.6. Depreciation on equipment/ assets deployed

for survey activities is charged to the Statement of Profit and Loss. n.6 Depletion

Oil & Gas Assets are depleted using the "Unit of Production Method”. The rate of depletion is computed with reference to an area covered by individual lease/license/asset/amortization base by considering the proved developed reserves and related capital costs incurred including estimated future abandonment costs net of salvage value. Acquisition cost of Oil & Gas Assets is depleted by considering the proved reserves. These reserves are estimated annually by the Reserve Estimates Committee of the Company, which follows the International Reservoir Engineering Procedures. n.7 Amortization

Leasehold land is amortized over the lease period except perpetual leases.

Intangible assets are amortized on Straight Line Method (SLM) over the useful life not exceeding five years from the date of capitalization. n.8 Impairment Oil & Gas Assets, Development Wells in Progress (DWIP), and Fixed Assets (including Capital Works in Progress) of a "Cash Generating Unit" (CGU) are reviewed for impairment at each Balance Sheet date. In case, events and circumstances Indicate any impairment, recoverable amount of these assets is determined. An impairment loss is recognized, whenever the carrying amount of such assets exceeds the recoverable amount. The recoverable amount is higher of its ‘value in use'''' or ''''net selling price'''' (if determinable). In assessing value in use, the estimated future cash flows from the use of assets and from its disposal at the end of its useful life are discounted to their present value at appropriate rate.

An impairment loss is reversed if there is increase in the recoverable amount and such loss either no longer exists or has decreased. Impairment loss / reversal thereof is adjusted to the carrying value of the respective assets, which in case of a CGU, is allocated to its assets on a pro-rata basis. Subsequent to impairment, depreciation is provided on the revised carrying value of the assets over the remaining useful life.

Impairment testing during exploratory phase is earned out at area level when further exploration activities are not planned in near future or when sufficient data exists to indicate that although a development in the specific area is likely to proceed, the carrying amount of the exploration asset is unlikely to be recovered in full from successful development or by sale. Impairment is reversed subsequently, to the extent that conditions for impairment are no longer present,

o. Foreign Exchange Transactions

Transactions in foreign currencies are accounted for at the exchange rate prevailing on the date of the transaction. Foreign currency monetary assets and liabilities at the year-end are translated using mean exchange rate prevailing on the last day of the financial year. The loss or gain thereon and also the exchange differences on settlement of the foreign currency transactions during the year are recognized as income or expense and adjusted to the Statement of Profit and Loss, p. Employee Benefits

p.1 All short term employee benefits are recognized at their undiscounted amount in the accounting period in which they are incurred, p.2 Employee Benefit under defined contribution plans comprising provident fund etc. is recognized based on the undiscounted amount of obligations of the company to contribute to the plan. The same is paid to a fund administered through a separate trust, p.3 Employee benefits under defined benefit plans comprising of gratuity, leave encashment, compensated absences, post-retirement medical benefits and other terminal benefits are recognized based on the present value of defined benefit obligation, which is computed on the basis of actuarial valuation using the Projected Unit Credit Method. Actuarial Liability in excess of respective plan assets is recognized during the year. Actuarial gains and losses in respect of post-employment and other long-term benefits are recognized during the year. The Company contributes all ascertained liabilities with respect to Gratuity and leave/compensated absences to the ONGC''''s Gratuity Fund Trust (OGFT) and Life Insurance Corporation of India (LICI) respectively. Other defined benefit schemes are unfunded, q. Voluntary Retirement Scheme

Expenditure on Voluntary Retirement Scheme (VRS) is charged to the Statement of Profit and Loss when incurred, r. General Administrative Expenses

General administrative expenses which are directly attributable are allocated to activities and the balance is charged to Statement of Profit and Loss, s. Insurance claims

The company accounts for insurance claims are as under

s.1 In case of total loss of asset, by transferring either the carrying cost of the relevant asset or insurance value (subject to deductibles), whichever is lower under the head "Claims Recoverable-insurance" on intimation to Insurer. In case insurance claim is less than carrying cost, the difference is charged to Statement of Profit and Loss. s.2 In case of partial or other losses, expenditure incurred/payments made to put such assets back into use, to meet third party or other liabilities (less policy deductibles) if any, are accounted for as ‘Claims Recoverable-insurance''''. Insurance Policy deductibles are expensed in the year the corresponding expenditure is incurred.

s.3 As and when claims are finally received from insurer, the difference, if any, between Claims Recoverable-insurance and claims received is adjusted to Statement of Profit and Loss, t. Research Expenditure

Expenditure of capital nature are capitalized and expenses of Revenue nature are charged to the Statement of Profit and Loss, as and when incurred,

u. Taxes on Income

Provision for current tax is made as per the provisions of the Income Tax Act. 1961. Deferred Tax Liability / Asset resulting from ‘timing difference’ between book profit and taxable profit is accounted for considering the tax rate and laws that have been enacted or substantively enacted as on the Balance Sheet date. Deferred Tax Asset is recognized and carried forward only to the extent that there is reasonable certainty that such asset will be realized in future, v. Borrowing Costs

Borrowing Cost specifically identified to the acquisition or construction of qualifying assets is capitalized as part of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for intended use. All other borrowing costs are charged to the Statement of Profit and Loss, w. Rig Days Costs

Rig movement costs are booked to the next location drilled/planned for drilling. Abnormal Rig days'''' costs are considered as unallowable and charged to the Statement of Profit and Loss,

x. Unamortized Expenditure

Dry docking charges of Rigs/ Multipurpose Supply Vessels (MSVs), Geo Technical Vessels (GTVs). Well Stimulation Vessels, Offshore Supply Vessels (OSVs), Rig/equipment mobilization expenses and other related expenditures are amortized over the period of use not exceeding five years and the balance is carried under head ‘Unamortized Expenditure" in the Balance Sheet, y. Provisions, Contingent Liabilities and Contingent Assets

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources embodying economic benefits. Contingent Assets are neither recognized nor disclosed in the financial statements. Contingent liabilities are disclosed by way of notes to accounts, z. Earnings per Share

Basic earnings per share are computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares, aa. Cash Flow Statement

Cash flows are reported using the indirect method, where by profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at compliance@dynamiclevels.com

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