BPCL would be top pick, says Macquarie

According to Jal Irani, Managing Director of Oil & Gas Research at Macquarie Group, whole OMC bunch looks good on the back of reforms. BPCL would be top pick, he adds.

Irani told CNBC-TV18, “Oil marketing companies (OMC) do present significant opportunities on several fronts especially BPCL. Now, conventionally, these companies are typically counter cyclical to oil and that’s been well established. Therefore, the recent move suggests that for diesel which is half the subsidy burden, we are looking at roughly a breakeven price of about USD 90-92 per barrel of crude which is not very far out of reach.”
“The government has been fairly steadily reforming whether capping LPG cylinders, increasing diesel prices. So this entire sector is looking extremely promising. Between these stocks, BPCL has also got an extremely large upstream portfolio. In fact, a little less than half its value comes from now upstream which has all been created in the last two or three years. Not only Mozambique, but within next one year in Brazil as well in Kaveri onshore in India, looks extremely promising. So indeed, whole OMC bunch looks good on the back of reforms but by far, BPCL would be our top pick,” Irani added.