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Oil & Gas
n Crude Oil price during the Q4FY11 averaged ~US$101 per bbl as compared to ~US$84 per bbl in Q3FY11.
n However, spreads in light and middle distillates remains strong during the quarter, implying higher demand for petro
products. We expect OMC’s GRM in the range of US$5.5-6.6 per bbl higher than Q3FY11.
n During the quarter finance minister has given Rs.210bn as cash compensation to OMC’s for losses incurred on
selling petroleum products at below market prices. Till 9m FY11 OMC’s have received Rs.366bn compensation from
the Government and upstream companies.
n The upstream companies subsidy share expected to remain at 33% of the total under recovery, even though the
absolute level is expected to rise significantly.
n For Q4FY11, we estimate total under recovery at Rs.330bn. At current crude oil price under recovery on Diesel is at
Rs.16 per ltr, Rs.28 per ltr for SKO and Rs.325 per cyl for LPG. However, we have not considered the under recovery
on petrol, due to deregulation of the petrol prices.
n Pressure on the US dollar has been diverting interest of investors towards commodities including crude oil. If US
dollar continues to remain under pressure, the commodities are likely to stay firm including crude oil, hurting the
OMC’s performance.
n We expect OMC’s to report revenue growth of 11.9% in Q4FY11E compared to Q4FY10 led by higher crude oil prices
and hence higher realisation for companies. Higher spreads in the light and middle distillate improves GRM and
profitability of the OMC’s.
Natural Gas Emkay
n We expect natural gas transmission volume (GAIL and GSPL) is expected to remain flat at 0.1% to 158mmscmd in
Q4FY11 compared to Q4FY10 but distribution companies (IGL and Gujarat Gas) would report healthy growth of 18%
YoY to 6.4mmscmd in Q4 FY11.
n Petronet LNG is expected to registered healthy volume growth of 29.7%, YoY to 119.1tbtu in Q4FY11.
n Natural Gas universe likely to report revenue and profit growth of 36.8% and 14.7% YoY, respectively, primarily driven
by higher volume growth and higher realisation from GAIL, Petronet LNG and IGL.
n Natural gas universe likely to report EBIDTA growth of 20% YoY. However, higher subsidy burden on GAIL and cost
pressure on IGL drag down the margin from 20.2% to 17.8% YoY.
n The upstream companies’ subsidy share expected to remain at 33% of the total under recovery, even though the
absolute level is expected to rise significantly, due to higher crude oil prices.
n Subsidy burden is the key concern for GAIL’s profitability. Based on the expected under recovery for Q4FY11, we
expect subsidy burden for GAIL is at ~Rs.10bn. This would adversely hamper the sequential growth for the company.
n CGD companies like Gujarat Gas and Indraprastha Gas are expected to report lower margins on YoY and sequential
basis, due to the higher spot LNG prices.
n Overall, strong quarter for CGD and transmission companies.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oil & Gas
n Crude Oil price during the Q4FY11 averaged ~US$101 per bbl as compared to ~US$84 per bbl in Q3FY11.
n However, spreads in light and middle distillates remains strong during the quarter, implying higher demand for petro
products. We expect OMC’s GRM in the range of US$5.5-6.6 per bbl higher than Q3FY11.
n During the quarter finance minister has given Rs.210bn as cash compensation to OMC’s for losses incurred on
selling petroleum products at below market prices. Till 9m FY11 OMC’s have received Rs.366bn compensation from
the Government and upstream companies.
n The upstream companies subsidy share expected to remain at 33% of the total under recovery, even though the
absolute level is expected to rise significantly.
n For Q4FY11, we estimate total under recovery at Rs.330bn. At current crude oil price under recovery on Diesel is at
Rs.16 per ltr, Rs.28 per ltr for SKO and Rs.325 per cyl for LPG. However, we have not considered the under recovery
on petrol, due to deregulation of the petrol prices.
n Pressure on the US dollar has been diverting interest of investors towards commodities including crude oil. If US
dollar continues to remain under pressure, the commodities are likely to stay firm including crude oil, hurting the
OMC’s performance.
n We expect OMC’s to report revenue growth of 11.9% in Q4FY11E compared to Q4FY10 led by higher crude oil prices
and hence higher realisation for companies. Higher spreads in the light and middle distillate improves GRM and
profitability of the OMC’s.
Natural Gas Emkay
n We expect natural gas transmission volume (GAIL and GSPL) is expected to remain flat at 0.1% to 158mmscmd in
Q4FY11 compared to Q4FY10 but distribution companies (IGL and Gujarat Gas) would report healthy growth of 18%
YoY to 6.4mmscmd in Q4 FY11.
n Petronet LNG is expected to registered healthy volume growth of 29.7%, YoY to 119.1tbtu in Q4FY11.
n Natural Gas universe likely to report revenue and profit growth of 36.8% and 14.7% YoY, respectively, primarily driven
by higher volume growth and higher realisation from GAIL, Petronet LNG and IGL.
n Natural gas universe likely to report EBIDTA growth of 20% YoY. However, higher subsidy burden on GAIL and cost
pressure on IGL drag down the margin from 20.2% to 17.8% YoY.
n The upstream companies’ subsidy share expected to remain at 33% of the total under recovery, even though the
absolute level is expected to rise significantly, due to higher crude oil prices.
n Subsidy burden is the key concern for GAIL’s profitability. Based on the expected under recovery for Q4FY11, we
expect subsidy burden for GAIL is at ~Rs.10bn. This would adversely hamper the sequential growth for the company.
n CGD companies like Gujarat Gas and Indraprastha Gas are expected to report lower margins on YoY and sequential
basis, due to the higher spot LNG prices.
n Overall, strong quarter for CGD and transmission companies.
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