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Oil & Gas
Driven by a 11%QoQ rise in crude price in 1QFY12, gross retail underrecoveries
are estimated to have risen by 109%YoY/34%QoQ to Rs420bn.
While we build in 55% as government share, one-third for upstream and
remaining for downstream for full year FY12, we do not expect any
government support in 1QFY12.
Without any government support, the R&Ms will be forced to take a large
proportion of these huge retail fuel losses in their own books. This would force
the downstream companies (IOC/BPCL/HPCL) to report their highest ever
quartely loss.
A 11%QoQ increase in crude price and reversion in upstream sharing to onethird
(38% in FY11) would boost net realisation for ONGC (US$51/bbl,
+$13/bblQoQ) and Oil India (US$59/bbl, +$6/bblQoQ). Therefore, net profit
for both ONGC (Rs51.8bn, +41%YoY/+86%QoQ) and Oil India (Rs8.6bn,
+71%YoY/+53%QoQ) is expected to rise markedly on QoQ basis.
Despite QoQ flat gas transmission volumes (121mmscmd), reversion to onethird
sharing for upstream would allow GAIL to report a noticeable expansion
in net profit (Rs9.8bn,+10%YoY/+25%QoQ).
Lower KGD6 production (48mmsmcmd, -6%QoQ) and a QoQ decline in
petrochem margins would be more than offset by higher refining
(US$10.2/bbl, + $1/bblQoQ) resulting in a 17%YoY/6%QoQ increase in
Reliance’s net profit to Rs56.7bn.
Full Rajasthan volume of 125kbpd and 11%QoQ higher crude price should
allow Cairn to report a 6%QoQ rise in net profit (Rs26.1bn) even as tax rates
rise QoQ.
A 5%QoQ increase in volumes will be offset by a reset in tax to the marginal
rate, keeping Petronet’s net profit (Rs2.1bn) largely flat on a QoQ basis.
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