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Oil and Gas
Brent crude oil prices decline 2.3% QoQ to US$ 109.8 per barrel
Despite weaker global economy, the average Brent crude oil prices
remained at a higher level, mainly on account of tensions between the
West and Iran. The average Brent crude oil prices increased 26.3% YoY
from US$ 86.9 per bbl in Q3FY11 to US$ 109.8 per bbl in Q3FY12.
Overall, for the quarter, higher average oil prices & sharp rupee
depreciation would increase the realisations and profitability of the
exploration and production (E&P) companies. Cairn India, ONGC, OIL
India and RIL would be the key beneficiaries.
Gross under-recoveries for Q3FY12E at ~| 35,000 crore
Weakened rupee, high Brent crude oil prices & limited scope of price
deregulation would increase the estimated gross crude oil underrecoveries
from | 21,373 crore in Q2FY12 to | 35,000 crore in Q3FY12E.
We have modeled upstream companies share of subsidy burden at
33.3% in Q3FY12E. We estimate upstream, downstream and
government to bear subsidy burden of | 11,665 crore (33.3% share), |
8,334 crore (23.8% share) and | 15,000 crore (42.9% share), respectively
in Q2FY12. Hence, we believe that Oil Marketing Companies (HPCL,
BPCL and IOC) would report profits in the Q4FY12 against loss in
Q3FY12.
Gross refining margin decline QoQ
Singapore gross refining margins (GRM) have declined QoQ from $9.1
per barrel in Q2FY12 to $8 per barrel in Q3FY12 mainly on account of
drop in lower distillate crack spreads. This is negative for refiners like
RIL, Essar Oil, CPCL and MRPL.
Lower domestic gas volumes to be replaced by higher priced LNG
The decline in gas production from the Reliance KG-D6 basin from ~44
mmscmd in Q2FY12 to ~38 mmscmd in Q3FY12E has led to higher
import of costlier priced LNG from the global markets. Hence, large gas
transportation companies would report muted volumes YoY. The City
Gas Distribution (CGD) companies would report lower profitability
growth on account of rupee depreciation & higher LNG prices.
Company specific view
Company Remarks
Bharat
Petroleum
We expect 30.2% YoY increase in revenues due to increase in retail sales volumes &
higher product prices. We expect refining margins of $5/bbl vs. $4.6/bbl YoY. We
expect BPCL to report loss in the current quarter as we have assumed the
downstream companies will share 23.8% of total under-recoveries. We have
modelled net under-recoveries for OMCs at 8.8% in FY12E
Cairn India Ltd Revenues would increase 14% YoY due to higher realisation. The net oil & gas
production would remain flat YoY at 98944.5 boepd while oil realisation is expected
to increase by 28.1% YoY to $97.2 per bbl. We expect gross production from
Rajasthan fields to increase marginally YoY and QoQ at 1,26,000 boepd
Gujarat Gas We expect a 35.3% YoY increase in revenues on account of increase in prices to
pass on the higher LNG cost. The total volumes at 3.48 mmscmd are expected to
exhibit a marginal 3.6% YoY growth. EBITDA margin at 12% would exhibit a 1320 bps
YoY decline on sharp rupee depreciation and higher LNG costs
GSPL Revenues are expected to witness 4.3% YoY growth on account of windmill
business. We expect a decline in gas volumes resulting in 34.8 mmscmd in Q3FY12
against 35.3 mmscmd YoY on lower KG D6 production. The transmission charges are
expected to remain almost flat at | 0.85 per scm YoY
Hindustan
Petroleum
We expect 25.9% YoY increase in revenues due to increase in retail sales volumes &
higher product prices. We expect refining margins of $4/bbl vs. $5.1/bbl YoY. We
expect HPCL to report loss in the current quarter as we have assumed the
downstream companies will share 23.8% of total under-recoveries. We have
modelled net under-recoveries for OMCs at 8.8% in FY12E
Indraprastha Gas Revenues would increase 48.2% YoY on account of a 25.1% increase in sales volume
to 3.39 mmscmd and 17.8% increase in gross realisation to | 24.05 per scm. The
CNG price is expected to be at | 32 per kg in this quarter compared to | 27.45 in
Q3FY11 to pass on higher costs
Oil India Revenues are expected to increase 16.3% YoY mainly due to stronger dollar &
marginal volume growth. We expect oil production of 6.84 mmboe (higher by 3.95%
YoY), subsidy of $41.01 per bbl (| 1431.7 crore vs. | 558.6 crore YoY) and net
realisation of $68 per bbl in Q3FY12E against $67.1 per bbl YoY
Petronet LNG We expect 72.8% YoY revenue growth due to higher volumes as well as realisations.
We expect volumes to increase 17.1% YoY to 140.2 trillion British thermal units (2.7
mmt) in Q3FY12 on account of higher spot volumes (19.6 tbtu). PAT is expected to
increase due to higher regasification margins of | 33.3 per mmbtu
Shiv Vani Oil We expect revenues to increase marginally by 2.8% YoY due to reduced visibility on
order intake in the coming quarters. The EBITDA margin is expected to contract by
260 bps YoY to 44% in Q3FY12E
Source: ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Oil and Gas
Brent crude oil prices decline 2.3% QoQ to US$ 109.8 per barrel
Despite weaker global economy, the average Brent crude oil prices
remained at a higher level, mainly on account of tensions between the
West and Iran. The average Brent crude oil prices increased 26.3% YoY
from US$ 86.9 per bbl in Q3FY11 to US$ 109.8 per bbl in Q3FY12.
Overall, for the quarter, higher average oil prices & sharp rupee
depreciation would increase the realisations and profitability of the
exploration and production (E&P) companies. Cairn India, ONGC, OIL
India and RIL would be the key beneficiaries.
Gross under-recoveries for Q3FY12E at ~| 35,000 crore
Weakened rupee, high Brent crude oil prices & limited scope of price
deregulation would increase the estimated gross crude oil underrecoveries
from | 21,373 crore in Q2FY12 to | 35,000 crore in Q3FY12E.
We have modeled upstream companies share of subsidy burden at
33.3% in Q3FY12E. We estimate upstream, downstream and
government to bear subsidy burden of | 11,665 crore (33.3% share), |
8,334 crore (23.8% share) and | 15,000 crore (42.9% share), respectively
in Q2FY12. Hence, we believe that Oil Marketing Companies (HPCL,
BPCL and IOC) would report profits in the Q4FY12 against loss in
Q3FY12.
Gross refining margin decline QoQ
Singapore gross refining margins (GRM) have declined QoQ from $9.1
per barrel in Q2FY12 to $8 per barrel in Q3FY12 mainly on account of
drop in lower distillate crack spreads. This is negative for refiners like
RIL, Essar Oil, CPCL and MRPL.
Lower domestic gas volumes to be replaced by higher priced LNG
The decline in gas production from the Reliance KG-D6 basin from ~44
mmscmd in Q2FY12 to ~38 mmscmd in Q3FY12E has led to higher
import of costlier priced LNG from the global markets. Hence, large gas
transportation companies would report muted volumes YoY. The City
Gas Distribution (CGD) companies would report lower profitability
growth on account of rupee depreciation & higher LNG prices.
Company specific view
Company Remarks
Bharat
Petroleum
We expect 30.2% YoY increase in revenues due to increase in retail sales volumes &
higher product prices. We expect refining margins of $5/bbl vs. $4.6/bbl YoY. We
expect BPCL to report loss in the current quarter as we have assumed the
downstream companies will share 23.8% of total under-recoveries. We have
modelled net under-recoveries for OMCs at 8.8% in FY12E
Cairn India Ltd Revenues would increase 14% YoY due to higher realisation. The net oil & gas
production would remain flat YoY at 98944.5 boepd while oil realisation is expected
to increase by 28.1% YoY to $97.2 per bbl. We expect gross production from
Rajasthan fields to increase marginally YoY and QoQ at 1,26,000 boepd
Gujarat Gas We expect a 35.3% YoY increase in revenues on account of increase in prices to
pass on the higher LNG cost. The total volumes at 3.48 mmscmd are expected to
exhibit a marginal 3.6% YoY growth. EBITDA margin at 12% would exhibit a 1320 bps
YoY decline on sharp rupee depreciation and higher LNG costs
GSPL Revenues are expected to witness 4.3% YoY growth on account of windmill
business. We expect a decline in gas volumes resulting in 34.8 mmscmd in Q3FY12
against 35.3 mmscmd YoY on lower KG D6 production. The transmission charges are
expected to remain almost flat at | 0.85 per scm YoY
Hindustan
Petroleum
We expect 25.9% YoY increase in revenues due to increase in retail sales volumes &
higher product prices. We expect refining margins of $4/bbl vs. $5.1/bbl YoY. We
expect HPCL to report loss in the current quarter as we have assumed the
downstream companies will share 23.8% of total under-recoveries. We have
modelled net under-recoveries for OMCs at 8.8% in FY12E
Indraprastha Gas Revenues would increase 48.2% YoY on account of a 25.1% increase in sales volume
to 3.39 mmscmd and 17.8% increase in gross realisation to | 24.05 per scm. The
CNG price is expected to be at | 32 per kg in this quarter compared to | 27.45 in
Q3FY11 to pass on higher costs
Oil India Revenues are expected to increase 16.3% YoY mainly due to stronger dollar &
marginal volume growth. We expect oil production of 6.84 mmboe (higher by 3.95%
YoY), subsidy of $41.01 per bbl (| 1431.7 crore vs. | 558.6 crore YoY) and net
realisation of $68 per bbl in Q3FY12E against $67.1 per bbl YoY
Petronet LNG We expect 72.8% YoY revenue growth due to higher volumes as well as realisations.
We expect volumes to increase 17.1% YoY to 140.2 trillion British thermal units (2.7
mmt) in Q3FY12 on account of higher spot volumes (19.6 tbtu). PAT is expected to
increase due to higher regasification margins of | 33.3 per mmbtu
Shiv Vani Oil We expect revenues to increase marginally by 2.8% YoY due to reduced visibility on
order intake in the coming quarters. The EBITDA margin is expected to contract by
260 bps YoY to 44% in Q3FY12E
Source: ICICIdirect.com Research
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