Indian petroleum industry’s performance in the September 2012 quarter is likely to be better than in the June 2012 quarter, thanks to a stronger rupee, higher refinery margins and reduced under-recoveries.
However, compared with the year-ago period, the results would appear subdued. Again, the profitability of petroleum PSUs remains dependent on the government’s subsidy-sharing plan.
Crude oil prices, which had dropped to below $90 a barrel in the second half of June 2012, gained steadily to cross $115 by mid-September — the prices marginally eased later. The Indian basket of crude oil averaged $107 per barrel in the September quarter, which was on a par with the preceding quarter.
Nevertheless, the daily under-recovery figures given by the Petroleum Planning & Analysis Cell (PPAC) show that the industry’s daily under-recovery fell to . 430 crore in the September quarter from . 510 crore in the June quarter. This hints at a reduced under-recovery burden for the quarter.
The rupee dropped to a fivemonth low of 52.7 against the dollar at the end of September. Apart from reducing India’s crude import cost, it will enable companies, which were booking forex losses in the June quarter, to book forex profits now. Stateowned oil marketing companies will particularly benefit from this.
Gross refining margins (GRM) were steadily growing through the September 2012 quarter. A recent report by Bank of America Merrill Lynch acknowledged that in the September quarter, the benchmark Singapore refining margins, on average, had reached their highest level in four quarters. This will help standalone refiners, including MRPL, Essar Oil and particularly Reliance Industries. The benchmark refining margins are still lower than the year-ago levels.
“We expect RIL’s GRMs to be up 15% Q-o-Q, but down 10% Y-o-Y at $9 per barrel. The average gas production from KG-D6 will decline 8% Q-o-Q and 34% Y-o-Y to 30 mmscmd and other income will rise 50% Y-o-Y to . 1,650 crore. We estimate its net profit to increase 19% Q-o-Q, but decline 6.5% Y-o-Y to . 5,320 crore,” says a BRICS Securities note.
Most petroleum companies are expected to follow this trend and post better results in the September quarter, compared with the June quarter, but weak compared with the year-ago quarter.
However, Cairn India could be a major exception. The company had booked onetime expenses of over . 2,500 crore in the September 2011 quarter. Further, the company’s production has improved 33% to 1,31,000 barrels per day from the year-ago levels.
When it comes to the performance of the three oil marketing companies, everything would depend on the government’s ability and willingness to compensate them for the under-recoveries.
The trio had reported record losses in the June 2012 quarter when there was no compensation from the government.
KEY POINTS The rupee dropped to a five-month low of 52.7 against the dollar at the end of September. This will reduce oil import cost
Daily under-recoveries of the industry have fallen to . 430 crore in the September quarter from . 510 crore in the June quarter
Gross refining margins were steadily growing through the September 2012 quarter. This will help oil refiners
However, compared with the year-ago period, the results would appear subdued. Again, the profitability of petroleum PSUs remains dependent on the government’s subsidy-sharing plan.
Crude oil prices, which had dropped to below $90 a barrel in the second half of June 2012, gained steadily to cross $115 by mid-September — the prices marginally eased later. The Indian basket of crude oil averaged $107 per barrel in the September quarter, which was on a par with the preceding quarter.
Nevertheless, the daily under-recovery figures given by the Petroleum Planning & Analysis Cell (PPAC) show that the industry’s daily under-recovery fell to . 430 crore in the September quarter from . 510 crore in the June quarter. This hints at a reduced under-recovery burden for the quarter.
The rupee dropped to a fivemonth low of 52.7 against the dollar at the end of September. Apart from reducing India’s crude import cost, it will enable companies, which were booking forex losses in the June quarter, to book forex profits now. Stateowned oil marketing companies will particularly benefit from this.
Gross refining margins (GRM) were steadily growing through the September 2012 quarter. A recent report by Bank of America Merrill Lynch acknowledged that in the September quarter, the benchmark Singapore refining margins, on average, had reached their highest level in four quarters. This will help standalone refiners, including MRPL, Essar Oil and particularly Reliance Industries. The benchmark refining margins are still lower than the year-ago levels.
“We expect RIL’s GRMs to be up 15% Q-o-Q, but down 10% Y-o-Y at $9 per barrel. The average gas production from KG-D6 will decline 8% Q-o-Q and 34% Y-o-Y to 30 mmscmd and other income will rise 50% Y-o-Y to . 1,650 crore. We estimate its net profit to increase 19% Q-o-Q, but decline 6.5% Y-o-Y to . 5,320 crore,” says a BRICS Securities note.
Most petroleum companies are expected to follow this trend and post better results in the September quarter, compared with the June quarter, but weak compared with the year-ago quarter.
However, Cairn India could be a major exception. The company had booked onetime expenses of over . 2,500 crore in the September 2011 quarter. Further, the company’s production has improved 33% to 1,31,000 barrels per day from the year-ago levels.
When it comes to the performance of the three oil marketing companies, everything would depend on the government’s ability and willingness to compensate them for the under-recoveries.
The trio had reported record losses in the June 2012 quarter when there was no compensation from the government.
KEY POINTS The rupee dropped to a five-month low of 52.7 against the dollar at the end of September. This will reduce oil import cost
Daily under-recoveries of the industry have fallen to . 430 crore in the September quarter from . 510 crore in the June quarter
Gross refining margins were steadily growing through the September 2012 quarter. This will help oil refiners
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