Oil & gas results preview for Q1FY13: Emkay

For Q1FY13, under-recoveries on sale of HSD, SKO and LPG have increased to Rs.438bn as against Rs.430bn in Q4FY12. On QoQ under-recoveries increased marginally by 1.8% on account of depreciation of Rupee (Averaged $50.8 v/s $54.2/bbl). However Brent crude oil price decline by 7.6%QoQ.

OMCs would have inventory losses during the quarter on account of declining oil prices. We expect OMC’s GRM to be in the range of $3.2-3.5 and assume 33% sharing by upstream companies for the quarter (Rs.146bn). We also factor in government support to the extent of 33%.

During the quarter, the benchmark refining margins decreased to US$7/bbl, compared to US$7.6/bbl in 4QFY12 mainly on account of decrease spreads for LPG, HSD and naphtha. However petchem margins have increased sequentially during the quarter.

For RIL, a depreciating rupee would have positive impact on overall profitability for the quarter. We factor in lower GRMs for YoY (US$10.3/bbl) and QoQ (US$7.6/bbl) at US$7.4/bbl, on the back of decline in product spreads. Difference between light-heavy crude oil has increased marginally by US$0.4/bbl to US$2.4/bbl. Sequentially, petchem margins have increased during the quarter. We factor in lower gas production from KG basin at 32mmscmd in Q1FY13 from 36.5mmscmd in Q4FY12. Our net profit estimate for Q1FY13E stands at Rs44.4bn a growth of 4.9%QoQ and decline of 21.5%YoY.

Natural Gas universe likely to report revenue and profit growth of 5% and 24.7% QoQ, respectively, primarily driven by higher realization across all the segments. However, on account of increase in prices of RLNG and rupee depreciation; the raw material cost for CGD players (like IGL and GGCL) is expected to be higher. Thereby affecting the margins for CGD players during the quarter.