Oil & gas companies Q1 net sales to increase broadly: Angel

During 1QFY2013, average Brent crude oil price fell by 8.7% qoq on account of adverse news flow from the troubled Eurozone. Further, average WTI crude oil price decreased by 9.3%, broadly reflecting the fall in Brent crude oil price. Henry Hub natural gas price declined by 5.6% qoq due to rising production of shale gas (thus rising inventories) and warmer summer. However, Asian spot LNG prices continued to remain high on account of demand-supply mismatch in Asia. Prices of petrochemical products, on the other hand, remained flat on a qoq basis during 1QFY2013.

During April and May 2012, Indian crude oil basket for oil prices stood at US$118/bbl and US$108/bbl, respectively. Despite INR depreciation against the USD, the steep decline has resulted in lower under-recoveries for oil marketing companies (OMCs) on account of selling diesel, kerosene and domestic LPG at subsidized rates. During the first half of June 2012, OMCs continued to lose Rs 446cr per day compared to Rs 563cr per day in April 2012. OMCs continued to lose Rs 10.2/liter, Rs 30.5/liter and Rs 396/cylinder on diesel, kerosene and domestic LPG, respectively, during the first half of June 2012.

Mixed 1QFY2013 performance by O&G stocks
During 1QFY2013, BSE Oil and Gas (O&G) Index recorded a moderate decrease of 0.5%, although BSE Sensex was positive by 0.1%. After a rise during 4QFY2012, oil and gas stocks again fell during April and May 2012, in-line with the fall in broader markets. However, the stocks increased during June 2012. Cairn India stock fell steeply on June 29, 2012, after Cairn Energy sold its 3.5% stake by way of bulk deal in the open market. RIL stock fell during April and May 2012, but increased in June 2012 due to the ongoing buyback program by promoters. GAIL stock declined during 1QFY2013, reflecting the decrease in KG-D6 gas production and higher international gas prices. ONGC was the outperformer in the oil and gas sector. The stock increased substantially in June 2012, after it posted better-than-expected 4QFY2012 results.

1QFY2013 expectations
For 1QFY2013, we expect net sales of companies under our coverage to increase broadly, mainly driven by higher volume growth. We expect ONGC's net sales to increase by 20.2% yoy on account of higher realization. ONGC's PAT is expected to increase by 31.4% yoy. For RIL, we expect the top line to decrease modestly by 0.2%. However, its bottom line is expected to decrease by 28.0% yoy mainly due to lower production from KG-D6 block. GAIL is expected to report 20.7% yoy topline growth on account of higher volumes. However, its net profit is expected to decrease by 23.0% yoy due to higher interest and depreciation expenses. Cairn India's net sales are expected to increase by 1.3% yoy; however, its bottom line is expected to decrease by 9.1% yoy.