Sector Preview Q3FY15 - Oil & Gas :: HDFC Securities

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
BSE Oil and Gas index declined by 6% to close 9895 on 31-Dec-2014, whereas Cairn India and ONGC declined by 21% and 15% in 3 months due to the decline in crude oil
price will have negative impact on gross realization. Refining companies though continued to rise on expectations of lower subsidy burden due to falling crude prices
and deregulation of diesel prices.
Decline in Crude oil prices and stronger rupee will have negative impact on gross realization of upstream Companies; however fall in subsidy burden to partially
compensate.
Brent and U.S. WTI crude oil prices fell to their lowest levels in almost six years as OPEC producers decided not to cut output to tackle a glut in the market. Oil prices
have fallen 60% from their June 2014 peaks, driven down by rising production, particularly U.S. shale oil and weaker demand in Europe and Asia. This could have an
impact on the gross realizations of upstream companies although mild Rupee depreciation (2.8%) could limit the fall in crude realizations to some extent.
Gross crude oil under-recoveries are estimated to decrease QoQ from Rs.22,419 Cr in Q2FY15 to Rs 15,400 Cr in Q3FY15E on account of deregulation of diesel prices and
decline in crude oil prices. We estimate the government’s share of the subsidy burden at 45% in Q3FY15E. We estimate upstream companies will bear a subsidy burden
of ~Rs 11,000 Cr (vs Rs.16,000 cr in Q2FY15).
Singapore gross refining margins (GRMs) have increased QoQ from $4.8/bbl in Q2FY15 to $6.3/bbl in Q3FY15 mainly on account of increase in gas oil crack spreads from
$14/bbl in Q2FY15 to $15.3/bbl in Q3FY15E and also jet kerosene spreads which increased from $14.5/bbl in Q2FY15 to $17.8/bbl in Q3FY15E. However, the benefit of
higher GRMs for the refiners would be offset (in part or full) by sharp decline in crude oil prices leading to inventory losses.
According to data from the Petroleum Planning and Analysis Cell (PPAC), a statistical body under the ministry of petroleum and natural gas, Indian Oil Corp. Ltd (IOCL),
Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) are operating at GRMs which are the lowest in the last four fiscals.

LINK
http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3010853