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Oil India Ltd.
Underweight
OILI.BO, OINL IN
3QFY11 impacted by lower offtake/higher dry well expenses
• 3Q profits below expectations: Oil India reported 3Q profits of
Rs9.08bn (down 1% q/q), below expectations, led by a combination of
higher dry well expenses, higher subsidies and lower than expected
crude oil production.
• Oil production disappoints…: Crude oil sales fell 4% sequentially,
despite a resumption of supplies to the Numaligarh refinery. As such,
OIL is likely to miss our full year sales estimate of 3.7mmt.
• ....while gas sales picked up: Gas sales rose 8% sequentially, with
customer off-takes improving over the subdued levels of 1HFY11. With
the commissioning of Duliajan-Numaligarh pipeline expected in Feb’11,
which will carry gas to the Numaligarh refinery, we expect gas sales to
improve through 4Q11 and into FY12.
• Subsidies rise with crude….: Oil India provided Rs5.59bn in subsidy
support to the downstream companies in 3Q (up 40% sequentially), as
crude remained elevated through the quarter. However, net crude
realizations improved to $67.1/bbl from $63.2/bbl last quarter.
• ….but policy risks remain: While petrol de-regulation continues to
work, high inflation levels have necessitated a delay in implementation
of diesel de-regulation. With Brent crude prices crossing $100/bbl,
potentially higher than expected marketing losses and uncertainty on the
final quantum of upstream support cause a continued lack of visibility of
Oil India earnings.
• Price target, valuations and key risks: We maintain our Underweight
stance, and Sep-11 price target of Rs1200, based on 4x FY12
EV/EBITDA, a 10% discount to regional peers due to continuing policy
uncertainty. Key risks to our call emanate from policy initiatives on
subsidy sharing and diesel de-regulation, as well as any significant
exploratory success.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oil India Ltd.
Underweight
OILI.BO, OINL IN
3QFY11 impacted by lower offtake/higher dry well expenses
• 3Q profits below expectations: Oil India reported 3Q profits of
Rs9.08bn (down 1% q/q), below expectations, led by a combination of
higher dry well expenses, higher subsidies and lower than expected
crude oil production.
• Oil production disappoints…: Crude oil sales fell 4% sequentially,
despite a resumption of supplies to the Numaligarh refinery. As such,
OIL is likely to miss our full year sales estimate of 3.7mmt.
• ....while gas sales picked up: Gas sales rose 8% sequentially, with
customer off-takes improving over the subdued levels of 1HFY11. With
the commissioning of Duliajan-Numaligarh pipeline expected in Feb’11,
which will carry gas to the Numaligarh refinery, we expect gas sales to
improve through 4Q11 and into FY12.
• Subsidies rise with crude….: Oil India provided Rs5.59bn in subsidy
support to the downstream companies in 3Q (up 40% sequentially), as
crude remained elevated through the quarter. However, net crude
realizations improved to $67.1/bbl from $63.2/bbl last quarter.
• ….but policy risks remain: While petrol de-regulation continues to
work, high inflation levels have necessitated a delay in implementation
of diesel de-regulation. With Brent crude prices crossing $100/bbl,
potentially higher than expected marketing losses and uncertainty on the
final quantum of upstream support cause a continued lack of visibility of
Oil India earnings.
• Price target, valuations and key risks: We maintain our Underweight
stance, and Sep-11 price target of Rs1200, based on 4x FY12
EV/EBITDA, a 10% discount to regional peers due to continuing policy
uncertainty. Key risks to our call emanate from policy initiatives on
subsidy sharing and diesel de-regulation, as well as any significant
exploratory success.
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