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Pains continues for PSUs, RIL; Cairn gains
Weak INR, rising under-recoveries to hit Oil PSUs yet again
The weakening INR has meant a sharp rise in under-recoveries,
leading to the OMCs staring at Q3FY12 under-recoveries of
~INR350bn. Post the price hikes and duty cuts in Jul’11, the annual
under-recoveries were estimated to be ~INR1.2trn; however the weak
INR has single-handedly lifted this estimated figure to INR1.4trn. The
Government has announced INR150bn support for OMCs in Q3FY12
(INR300bn for FY12 so far), while upstream companies look certain at
take a much bigger burden than in H1FY12. The upstream PSUs would
have shared ~INR600bn (pre- duty cuts in Jul’11), and we believe that
these companies would now eventually end-up sharing this burden by
FY12-end anyways, implying a 42% share. This also means that ONGC
and OIL will bear 55% share in H2FY12; however whether it is evenly
divided in Q3/Q4 remains to be seen. Assuming the Government’s
usual pattern for Q4 adjustments, we have assumed 33% sharing for
upstream companies in Q3FY12 giving USD62/bbl and INR70/bbl net
realizations for ONGC and OIL respectively.
Weak for RIL, strong for Cairn
We expect a weak quarter for RIL driven mainly through soft GRMs of
~USD7.5/bbl and lower KGD6 gas volumes at ~42mmscmd. We also
expect weakness in petchem spreads despite better product prices due
to INR depreciation. However, we expect a sharp rise in other income
due to the cash influx of the BP deal and estimate RIL to report an
EBITDA of ~INR82bn and net profit of INR48.7bn. Cairn India on the
other hand, as the sole sector beneficiary of the INR depreciation,
should report strong Q3FY12 numbers due to higher realizations. We
also expect Cairn to come out with some positive announcements on
field ramp-up/start approvals post the results in the coming months.
Maintain Cairn India as our top pick, maintain Reduce on RIL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pains continues for PSUs, RIL; Cairn gains
Weak INR, rising under-recoveries to hit Oil PSUs yet again
The weakening INR has meant a sharp rise in under-recoveries,
leading to the OMCs staring at Q3FY12 under-recoveries of
~INR350bn. Post the price hikes and duty cuts in Jul’11, the annual
under-recoveries were estimated to be ~INR1.2trn; however the weak
INR has single-handedly lifted this estimated figure to INR1.4trn. The
Government has announced INR150bn support for OMCs in Q3FY12
(INR300bn for FY12 so far), while upstream companies look certain at
take a much bigger burden than in H1FY12. The upstream PSUs would
have shared ~INR600bn (pre- duty cuts in Jul’11), and we believe that
these companies would now eventually end-up sharing this burden by
FY12-end anyways, implying a 42% share. This also means that ONGC
and OIL will bear 55% share in H2FY12; however whether it is evenly
divided in Q3/Q4 remains to be seen. Assuming the Government’s
usual pattern for Q4 adjustments, we have assumed 33% sharing for
upstream companies in Q3FY12 giving USD62/bbl and INR70/bbl net
realizations for ONGC and OIL respectively.
Weak for RIL, strong for Cairn
We expect a weak quarter for RIL driven mainly through soft GRMs of
~USD7.5/bbl and lower KGD6 gas volumes at ~42mmscmd. We also
expect weakness in petchem spreads despite better product prices due
to INR depreciation. However, we expect a sharp rise in other income
due to the cash influx of the BP deal and estimate RIL to report an
EBITDA of ~INR82bn and net profit of INR48.7bn. Cairn India on the
other hand, as the sole sector beneficiary of the INR depreciation,
should report strong Q3FY12 numbers due to higher realizations. We
also expect Cairn to come out with some positive announcements on
field ramp-up/start approvals post the results in the coming months.
Maintain Cairn India as our top pick, maintain Reduce on RIL.
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