Oil & Gas: Supply side pressures to weigh on crude in FY14

Prabhudas Lilladher has come out with its earning estimates on oil & gas sector for the quarter ended December 2012. According to the research firm, supply-side pressures is expected to weigh on crude in FY14, providing the much needed respite for upstream companies from current levels of high under-recoveries and adverse subsidy-sharing scenario.

Crude oil prices traded in the narrow range during the quarter, with Brent oil prices averaging at US$110.4/bbl during the quarter. Under-recoveries continues to run high, with quarterly under-recovery estimate of Rs387bn and full year expected at ~Rs1,620bn (Rs1,350bn in FY12).

The retreat in refining margins that started in Oct 2FN has continued through the quarter, as more refineries have returned from turnarounds. Singapore refining margins have seen a sharp fall, averaging ~US$6.6/bbl in the current quarter compared to US$9.15/bbl in Q2FY13.

India destination LNG prices increased during the quarter to average ~US$12.5/mmbtu, increase in the prices is largely on account of winter season. Crude - prices were range bound (US$105/bbl-US$112/bbl), averaged at US$110.4/bbl in Q3FY13

Brent has continued to hover around ~US$110/bbl mark, on the back of 1) renewed demand concerns (Both IEA and EIA have cut demand forecasts by ~0.1mbpd in 2013) and improved non-OPEC supply outlook (IEA upped its forecast by ~0.15 mbpd) driven by better-than-anticipated output from US shale fields, 2) increased geopolitical tensions in the Middle east supporting prices. We expect supply-side pressures to weigh on crude in FY14, providing the much needed respite for upstream companies from current levels of high under-recoveries and adverse subsidy-sharing scenario. Although recent comments from the Saudi oil minister suggested that demand-supply conditions favour lower prices, a continued risk on environment on account of QE3 could continue to support prices.

Company		Q3FY13E	Q3FY12	% YoY	Q2FY13	QoQ
ONGC	Sales	189,262	181,238	4.4	198,851	-4.8
	EBITDA	95,018	106,576	-10.8	103,687	-8.4
	Margins (%)	50.2	58.8	52.1	52.6	59.9
	PAT	49,747	67,414	-26.2	58,966	-15.6
Reliance Industries	Sales	894,719	851,350	5.1	903,350	-1
	EBITDA	75,324	72,850	3.4	77,050	-2.2
	Margins (%)	8.4	8.6	8.5	8.1	11.1
	PAT	50,168	44,400	13	53,760	-6.7
Cairn India	Sales	42,496	30,968	37.2	44,431	-4.4
	EBITDA	32,346	25,456	27.1	34,516	-6.3
	Margins (%)	76.1	82.2	77.7	77.5	82.7
	PAT	30,351	22,619	34.2	23,222	30.7
GAIL	Sales	120,546	112,598	7.1	113,612	6.1
	EBITDA	16,494	17,605	-6.3	13,803	19.5
	Margins (%)	13.7	15.6	12.1	14.3	16.6
	PAT	9,427	10,914	-13.6	9,854	-4.3
Oil India	Sales	23,185	24,963	-7.1	25,194	-8
	EBITDA	10,858	13,347	-18.6	12,649	-14.2
	Margins (%)	46.8	53.5	50.2	49.4	51.1
	PAT	8,322	10,140	-17.9	9,546	-12.8
Petronet LNG	Sales	81,963	63,303	29.5	75,486	8.6
	EBITDA	5,190	5,032	3.1	5,184	0.1
	Margins (%)	6.3	7.9	6.9	6.6	8.5
	PAT	3,003	2,954	1.7	3,148	-4.6
Gujarat State Petronet	Sales	2,555	2,739	-6.7	2,732	-6.5
	EBITDA	2,335	2,518	-7.3	2,520	-7.3
	Margins (%)	91.4	91.9	92.2	91.9	92
	PAT	1,157	1,261	-8.3	1,328	-12.9
Gujarat Gas Company	Sales	8,795	6,510	35.1	8,372	5
	EBITDA	1,386	300	362.8	1,379	0.5
	Margins (%)	15.8	4.6		16.5
	PAT	937	243	285.1	1,001	-6.4
Indraprastha Gas	Sales	8,844	6,631	33.4	8,552	3.4
	EBITDA	2,078	1,504	38.1	2,066	0.6
	Margins (%)	23.5	22.7		24.2
	PAT	964	692	39.4	992	-2.8