The upstream segment continued to enjoy favorable conditions due to the buoyant crude prices. In fact, ONGC’s operating margins (OPM) and net profit margins (NPM) improved substantially in 1QFY09 over 4QFY08. However, it subsidises a substantial portion of the under recoveries of the downstream oil marketing companies which is announced in an ad hoc manner. As a result earning visibility remains poor.
The midstream segment continued to do well because these companies earn transportation charges on volumes transmitted. They aren’t directly affected by high crude prices and the high demand for gas keeps their infrastructure operating at high levels. There was no substantial change in either the operating or net margins of the midstream companies in 1QFY09. We believe, this segment of the energy sector will continue to be insulated to gyrations in commodity prices or a possible slowdown in the economy.
In the downstream segment, the public sector oil marketing companies suffered the most in 1QFY09, as crude prices spiraled upwards mounting further under recoveries on them. They were also hit by one time provision of employee benefits. The other players managed to avoid a similar fate. Castrol sells lubricants and only suffered a small decline. As a pure refiner, Chennai Petro benefited from the buoyant gross refining margins (GRMs). RIL’s results were strangely subdued this quarter with it clocking GRMs lower than those of the public sector refineries. One of the possible reasons is that it holds lower inventory of crude as compared to its public sector counterparts. As crude prices spiked during the quarter, fresh contracts of crude made RIL’s inputs costs higher in comparison to its peers.
OPM NPM
>Upstream
- ONGC 59% 33%
>Midstream
- IGL 40% 23%
- GAIL 24% 16%
- Gujarat Gas* 18% 14%
- Petronet LNG 12% 6%
>Downstream
- Castrol 20% 13%
- RIL 15% 10%
- Chennai Petro 10% 6%
- BPCL -2% -3%
- HPCL -1% -3%
As the crude hovers around $120 currently and the fears of crude touching $ 200 are as such buried now, there are positive vibes in the industry. However, the spiking tensions between Iran and Israel cannot be ignored. There is danger lurking in the dark deserts........
http://www.invest-insight.blogspot.com/
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.
No comments:
Post a Comment