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OIL & GAS
Upstream Segment
Brent crude oil price is trading ~USD$121/bbls due to market uncertainty related to
1) the continued unrest in producing countries and its potential impact on supply 2)
OPEC decision to increase the supply to compensate for the loss of production 3) the
rate of global economic recovery and 4) Dollar depreciation.
In Mar'11, OPEC total crude oil supply decreased by 143k bopd (YoY) to 29.02 Mn
bopd with Libya's crude supply falling by 1.135 Mn bopd (YoY) to 390k bopd,
Angola's supply fell by 185k bopd (YoY) to 1.75 Mn bopd.
In Q4FY11, the average Brent crude oil price surged by 37% (YoY) and 20% (QoQ)
to USD$ 105.6/bbls leading to better realizations and margins for oil exploration
companies.
On the other hand, due to the loss of refining capacity in Japan (two refineries with
capacity of ~4.5 Mn bopd are shut) the prices of refined products increased. As a
result, world over refiners is seeing their gross refining margins improving. In
March'11, the Singapore refining margin has improved by 16.5% (MoM) to
USD$7.2/bbls, similarly, Gas oil price has increased by 11.6% (MoM) to USD$133.4/
bbls, followed by Naphtha price increased by 9.9% (MoM) to USD$107.4/bbls.
Mid Stream (Natural Gas):
Due to rise in crude oil price, the average Naphtha price has also increased to USD$
100.5/bbls in Q4FY11 (+14% QoQ, +28% YoY). As a result imported natural gas still
remains attractive as a feed stock. However, we believe two key concerns for domestic
gas transportation companies are the domestic natural gas availability and
the rising LNG prices.
Companies
n CAIRN INDIA: Upstream oil exploration company- Cairn India is expected to
show robust performance on volume and realization front in Q4FY11. Cairn India
is a private exploration company so it will reap full benefits of rising crude oil
prices.
In Q4FY11, we expect Cairn India's Rajasthan production to average around 125
kbopd. Also, we see marginal impact on profits due to lower other income (as
cash was used for exploration purpose) and higher exploration costs. In Q1FY12,
we expect the issue related to royalty and cess will be cleared by the government.
n IGL: IGL is the process of expanding its infrastructure in existing and new areas
in and around Delhi. The Company is planning to incur a capex of Rs.70 bn in
FY12.
On 2nd April'11, IGL has hiked the price of CNG in Delhi by Rs 0.30 per kg to Rs
29.30 per kg and by Rs.0.35 per kg to Rs 32.85 per kg in Noida, Greater Noida
and Ghaziabad because of increase in operating expenses as a result of revision
of minimum wages by the government.
Post price hike, CNG is still ~64% cheaper than the running cost of petrol driven
vehicles and if compared to diesel driven vehicles than it is ~ 22% cheaper.
There are more than four lakh CNG-run vehicles - both commercial and private -
in Delhi and the national capital region.
n Petronet LNG (PLNG): We expect PLNG to show strong volume growth on QoQ
basis mainly on account of higher gas demand and lower KG-6 gas production.
The Company filled the supply-demand gap by importing higher LNG. However,
with the rise in raw material cost we can see some pressure on profits but the
impact will be mitigated partly due to increase in regasification margins by 5%
w.e.f. January 1, 2011.
n GSPL: We expect GSPL to report de-growth in profits. We believe the key concern
is the domestic natural gas availability.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
OIL & GAS
Upstream Segment
Brent crude oil price is trading ~USD$121/bbls due to market uncertainty related to
1) the continued unrest in producing countries and its potential impact on supply 2)
OPEC decision to increase the supply to compensate for the loss of production 3) the
rate of global economic recovery and 4) Dollar depreciation.
In Mar'11, OPEC total crude oil supply decreased by 143k bopd (YoY) to 29.02 Mn
bopd with Libya's crude supply falling by 1.135 Mn bopd (YoY) to 390k bopd,
Angola's supply fell by 185k bopd (YoY) to 1.75 Mn bopd.
In Q4FY11, the average Brent crude oil price surged by 37% (YoY) and 20% (QoQ)
to USD$ 105.6/bbls leading to better realizations and margins for oil exploration
companies.
On the other hand, due to the loss of refining capacity in Japan (two refineries with
capacity of ~4.5 Mn bopd are shut) the prices of refined products increased. As a
result, world over refiners is seeing their gross refining margins improving. In
March'11, the Singapore refining margin has improved by 16.5% (MoM) to
USD$7.2/bbls, similarly, Gas oil price has increased by 11.6% (MoM) to USD$133.4/
bbls, followed by Naphtha price increased by 9.9% (MoM) to USD$107.4/bbls.
Mid Stream (Natural Gas):
Due to rise in crude oil price, the average Naphtha price has also increased to USD$
100.5/bbls in Q4FY11 (+14% QoQ, +28% YoY). As a result imported natural gas still
remains attractive as a feed stock. However, we believe two key concerns for domestic
gas transportation companies are the domestic natural gas availability and
the rising LNG prices.
Companies
n CAIRN INDIA: Upstream oil exploration company- Cairn India is expected to
show robust performance on volume and realization front in Q4FY11. Cairn India
is a private exploration company so it will reap full benefits of rising crude oil
prices.
In Q4FY11, we expect Cairn India's Rajasthan production to average around 125
kbopd. Also, we see marginal impact on profits due to lower other income (as
cash was used for exploration purpose) and higher exploration costs. In Q1FY12,
we expect the issue related to royalty and cess will be cleared by the government.
n IGL: IGL is the process of expanding its infrastructure in existing and new areas
in and around Delhi. The Company is planning to incur a capex of Rs.70 bn in
FY12.
On 2nd April'11, IGL has hiked the price of CNG in Delhi by Rs 0.30 per kg to Rs
29.30 per kg and by Rs.0.35 per kg to Rs 32.85 per kg in Noida, Greater Noida
and Ghaziabad because of increase in operating expenses as a result of revision
of minimum wages by the government.
Post price hike, CNG is still ~64% cheaper than the running cost of petrol driven
vehicles and if compared to diesel driven vehicles than it is ~ 22% cheaper.
There are more than four lakh CNG-run vehicles - both commercial and private -
in Delhi and the national capital region.
n Petronet LNG (PLNG): We expect PLNG to show strong volume growth on QoQ
basis mainly on account of higher gas demand and lower KG-6 gas production.
The Company filled the supply-demand gap by importing higher LNG. However,
with the rise in raw material cost we can see some pressure on profits but the
impact will be mitigated partly due to increase in regasification margins by 5%
w.e.f. January 1, 2011.
n GSPL: We expect GSPL to report de-growth in profits. We believe the key concern
is the domestic natural gas availability.
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