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Lowered production target but being conservative
Domestic production outlook is a shade lower than previous guidance, while overseas investments are turning out to be a
mixed bag.
Oil India is lowering its crude oil production target for FY12 by 3.5% to 3.76mn t/yr. However, they are quite confident of
exceeding the revised target.
While the company believes it can produce c10% more natural gas, it is constrained by lack of offtake.
OIL is likely to write off its expenses in exploration blocks in Timor and Iran. We therefore believe the higher write-off
witnessed in Q3FY11 is likely to continue in the next few quarters as well.
Investment in the Carabobo-1 project in Venezuela is likely to add c20% to OIL’s existing production by 2013.
Valuation and risks
We value the stock at 10x FY13e EPS of INR143.4, valuing it at INR1,434/share. We expect FY11 and FY12 EPS to be
INR131/share and INR141/share. The stock is currently trading at a PE of 9.9x for FY11 and 9.2x for FY12.
Any material fluctuation in the crude oil price can affect revenues and the under-recovery burden of the company and its
profitability. Failure to develop additional reserves or redevelop existing fields also adds to the risks. The company is
subject to the risk of higher subsidy burden.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Lowered production target but being conservative
Domestic production outlook is a shade lower than previous guidance, while overseas investments are turning out to be a
mixed bag.
Oil India is lowering its crude oil production target for FY12 by 3.5% to 3.76mn t/yr. However, they are quite confident of
exceeding the revised target.
While the company believes it can produce c10% more natural gas, it is constrained by lack of offtake.
OIL is likely to write off its expenses in exploration blocks in Timor and Iran. We therefore believe the higher write-off
witnessed in Q3FY11 is likely to continue in the next few quarters as well.
Investment in the Carabobo-1 project in Venezuela is likely to add c20% to OIL’s existing production by 2013.
Valuation and risks
We value the stock at 10x FY13e EPS of INR143.4, valuing it at INR1,434/share. We expect FY11 and FY12 EPS to be
INR131/share and INR141/share. The stock is currently trading at a PE of 9.9x for FY11 and 9.2x for FY12.
Any material fluctuation in the crude oil price can affect revenues and the under-recovery burden of the company and its
profitability. Failure to develop additional reserves or redevelop existing fields also adds to the risks. The company is
subject to the risk of higher subsidy burden.
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