Movement of BSE Oil & Gas vis-à-vis BSE 500
The surge in crude oil prices made oil & gas sector better performer during this quarter. India's domestic demand for oil and gas also rose during the period. Subsidies on transportation and cooking fuels have helped India sustain its petroleum products consumption growth of about 8-9% per annum. Among 11 companies in BSE Oil & Gas index, so far only 5 have declared their results which show a mixed tend in sales and profit. In the upstream segment, Aban and Essar managed to post a positive quarterly return (yoy) while Reliance companies witnessed fall in the PAT of around 10% each (yoy). Coming results of the other companies are also expected to be subdued. Meanwhile, India is making efforts to lower its oil import as Cairn India’s Rajasthan field production is going to offset up to 7% of country’s oil import and will increase India's total production by 20%. ONGC is also making new discoveries for oil wells around the country.
In the down stream segment, Oil marketing companies enjoyed a surplus of INR 3/ liter for petrol, INR 7/ liter for diesel, and borne under recovery of INR 10/ltr in kerosene and INR 44/cylinder this quarter. Slump in the middle and light distillate market led them to earn surplus in absolute terms in marketing segment since Indian consumption pattern is more inclined towards middle distillates. This year domestic gas availability was around 90mmsmcd, tough demand outstripped supply. With the arrival of KG basin gas from April 2009 which will narrow down the demand-supply gap.
Oil & Gas in Q4 FY 09
Essar Oil Ltd.
Reliance Natural Resources Ltd. (RNRL)
Reliance Petroleum Ltd. (RPL)
Oil & Gas on Bourses
BSE Oil & Gas index performed better during fourth quarter of FY09 on the back of better performance of upstream companies and RIL. The prices of upstream companies gained due to the recovery of oil prices while RIL delivered better return as the news of commissioning gas production from the KG D6 field and synergy from RIL-RPL merger which boosted the confidence among the investors.
Return posted by BSE sectoral indices vis-à-vis BSE 500 in Q4 FY09 (Q-o-Q)
BSE Oil & Gas indices was among better performers in BSE sectoral indices which delivered positive return of 16.58% out performed vis-à-vis BSE 500. In BSE Oil & Gas, scrips RIL topped with 23.81% return followed by GAIL with 18.57% and ONGC with 16.78% return while major losers were Aban Offshore Ltd. (-40.50%), RNRL (-21.59%), Essar Oil Ltd. (-16.37%).
Performance of BSE Oil & Gas stocks for Q4 FY09
Unfriendly global economic data like contracting industrial production of US and Euro zone and downgrading GDP growth rate of major oil consuming countries such as US, China and India continued to dampen the crude oil prices which hit the earnings of the major oil companies around the world. World’s second-largest non-government controlled oil company, Royal Dutch Shell Plc., reported fall in net profit by 28% this quarter. US oil giant Exxon Mobil had also reported 58% fall in this quarter earnings. Lower oil prices also affected the earnings of British oil major BP as its net profit plunged 62% for the first quarter while Chevron Corp reported a 64% decline in quarterly profit. However, crude prices are showing the sign of reversal from last quarter’s extreme low it is gradually increasing after OPEC decision to cut record 2.2 million bpd.
We expect a revival in the crude oil price and average within the range of USD 65-70 per barrel in the long term. Upstream companies like ONGC and Cairn India are expected to witness rise in gross realization. Further, production from the new blocks by upstream companies, like Cairn India-which is about to start production from its Rajasthan block which will deliver 30,000 bpd by the second quarter 2009-10, will help to improve the earnings of upstream companies as well as to reduce country’s dependency on import for its domestic consumption.
Tuesday, June 2, 2009
Sector Analysis: Oil and Gas
Posted by Morgan at 8:23 AM