Oil Drilling And Exploration (updated - 03 July 2009)
The Street has interpreted the fuel price hike to mean that a deregulation of oil prices is now unlikely in the near future. Nevertheless, the 6-10 per cent hike in the prices of automobile fuels is good news for the oil marketing firms which will now earn better realisations for petrol and diesel. It’s also good news for ONGC because it need to fork out less to compensate the oil marketing firms for losses on retail sales and that’s why the stock rose 7per cent.
Also, if GAIL was up 8 per cent, it’s because ONGC and GAIL may not have to pick up the Rs 30,000 crore tab for the under recoveries ( the difference between the higher cost price and the lower selling price) on kerosene and LPG, though there isn’t enough clarity on this yet.
Sector Specific - Oil Drilling & Exploration
As for BPCL, HPCL and IOC, which didn’t move much, these stocks have already had a fairly good run in the past couple of months. Also, even after this hike oil retailers will continue to lose some money on both diesel and petrol - the total loss is estimated at just over Rs 14,000 crore and they will continue to sell kerosene and LPG at less than cost.
So, while these firms are now better placed to deal with the higher price of crude oil, currently at $70 per barrel, they’re still not out of the woods. Among the three oil marketing firms, BPCL stands to gain the most because it has a relatively higher share of auto fuels of close to 58 per cent.
Analysts believe that ONGC’s earnings could rise by an additional 12 per cent in the current year due to lower subsidies and better net realisations. However, they point out that the oil major’s costs are likely to increase whereas production levels could be somewhat subdued in the near future. Although, the stock is trading at a discount to global upstream E&P peers they feel the current price of Rs 1127 is a fair value.
Analysts aren’t tweaking their numbers for oil retailers just yet since the proportion in which subsidies will be shared, between the upstream firms and themselves, is not too clear.
Given that crude oil prices could rise, they believe BPCL (Rs 453) and IOC (Rs 549) are trading above their fair values though there could be some upside in HPCL which is relatively cheaper and trades at 0.8 times price to book value.
source - businessstandard
Oil Drilling And Exploration (updated - 19 Mar 2009)
The country’s oil output may shoot up by 4.8 per cent to reach 36.14 million tonnes in the next fiscal driven by Reliance Industries Ltd (RIL) resuming crude oil production from its KG D6 wells coupled with capacity addition by other private and joint venture firms, says a report.
“We expect the growth in crude oil production to pace up in the following months. In 2009-10, we expect domestic crude oil production to grow by 4.8 per cent to 36.14 million tonnes,” the Centre for Monitoring Indian Economy (CMIE) said in its February 2009 review.
The growth in production is expected to be largely driven by private and joint venture companies, it said.
Mukesh Ambani-led RIL resumed crude production from its eastern offshore KG basin block earlier this month, after an equipment failure led to a three-month shutdown. The company first began pumping oil in September 2008. RIL started production with 5,000 barrels a day from this basin and claims to produce around 40,000 barrels a day by March 2009, the CMIE said.
“Further, the capacity addition by Cairn India and ONGC in 2009-10 are expected to contribute to the healthy growth in crude oil production,” it added. The CMIE, however, revised downward its crude output figures for the current fiscal ending March 31.
“We expect crude oil production to decline by 0.5 per cent to 34 million tonnes in 2008-09 from our earlier estimate of 1.1 per cent growth in production,” it said.
Production tanked by 8.1 per cent in January touching afour-year low to 26.6 per cent.
“The steep decline in output can be largely attributed to the three-day strike by ONGC workers in January 2009,” the CMIE said adding that the monthly decline was an “aberration”.
“ONGC, which accounts for 75 per cent of the total domestic crude output, witnessed a 8.7 per cent decline in production during the month,” it said.
The CMIE also expects refinery throughput to grow 7.7 per cent in the coming fiscal.
“The growth in refinery throughput in 2009-10 is expected to be largely fuelled by Reliance Petroleum’s (RPL) export-oriented refinery at Jamnagar,” it pointed out.
source - BS
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