Oil India confident of meeting FY17 volume target

Oil India reported a decent set of first quarter earnings where its revenue increased 11 percent to Rs 2,221.2 crore quarter-on-quarter (QoQ) and net profit went up 5 percent to Rs 494 crore.

In an interview with CNBC-TV18, Utpal Bora, Chairman and MD of Oil India said that there has been an increase in gas production in the first quarter and expects second quarter revenue to be better than Q1.

The company is confident of meeting its volume target it had set for FY17 and has further capex plans worth Rs 4,020 crore for this fiscal.Below is the verbatim transcript of Utpal Bora’s interview to Varinder Bansal, Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: Can you start off by telling us about the margin trajectory. This time around there was an improvement in your margin performance but is that something that we can expect for the next couple of quarters as well?A: Our profit after tax (PAT) has gone down by around 36 percent in Q1 of 2016-2017 compared to Q1 of 2015-2016. Main reason for that was the drop in oil prices, compared to last year we got it at USD 57.42 per barrel, this quarter it was USD 43.09 per barrel. That was almost 25 percent low price this year. So, that has led to a drop in PAT by around 33 percent.Varinder: How much money did you save on reduction in cess which has come down?A: Reduction in cess is there but that has been offset by the steep fall in oil prices as well as gas prices. In fact, our gas production went up, but the price fell -- compared to last year it was USD 4.66 per unit and this quarter it is USD 3.06 per unit.Latha: What might be your volume this year in gas and in oil?A: In Q2, we hope to do better than the first because of the revival of the crude price so our gross revenues will be slightly better.Latha: That will be revenues, I am asking you volume for the full year?A: The volumes for the year, we expect that with certain measures, we will be able to achieve the target which we set for us. We bring in some resources, which will be raised by end of October-November and we have certain plans by which we will be able to increase the volumes.The main reason for drop in gas prices because if you see the gas production has increased compared to last year. However, there was steep fall in price from USD 4.66 per unit to USD 3.06. So, that has offset the advantage of increased production in gas.However, there has been around 4 percent reduction in the production of crude oil due to various reasons. Due to environmental reasons, due to increase in declining rates and we are all taking measures to mitigate those.Anuj: I take your point on gas, my two part question is on crude -- first of all what kind of net realisation would you expect now? We are now again in rising crude scenario and secondly what about your capital expenditure (capex) plans for this year and for next year?A: Capex plan is approximately around Rs 4,020 crore for this year. We have slightly increased the allocation for exploration drilling and development drilling.As far as the price is concerned now it is around USD 45-46. We hope that in the coming quarters our realisations will improve.Latha: Will there be a further cut in gas prices on September 30th? What is your estimate?A: In the next quarter, there is further drop in gas prices as per the formula, which has been in place now.Latha: Have you estimated how much it might be because we are almost ending?A: Not right now, may be because our gas production is increasing. So let us see what effect it takes place.Varinder: The biggest concern remains in a drop in the crude production. Given by the numbers in Q1, the annualised crude production comes around 3.2 units and the highest what you achieved was nearly 3.82 in FY12 and this quarter is also lower year-on-year. What is your sense in terms of crude production in the next few quarters or even in FY18?A: The crude production has declined by around 4-5 percent in this quarter compared to the last quarter. The crude production -- if you go back to 2009-2010 it has been decreasing steadily. So the decline rate has been more than anticipated. So we have a lot of measures in place, we are trying our best to arrest the decline and see what happens. Some resources are in place, which will be in place by October- November and we hope to turn it around.