BackQ1 Results Review: OMCs report higher profit on soft oil prices, improved volumes; mixed results for CGDs
Leading state-run refiners including Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum reported robust earnings in the first quarter of current fiscal, compared to the year-ago period when profits were impacted due to pressure on oil prices after the Russia-Ukraine war.
PremiumOil marketing companies (OMCs) have largely reported growth in net profit during the April-June quarter of fiscal 2023-24, driven by softer crude oil prices and improved margins. Leading state-run refiners including Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum reported robust earnings in the first quarter of current fiscal, compared to the year-ago period when profits were impacted due to pressure on oil prices after the Russia-Ukraine war.
OMCs did not significantly increase retail prices last year even after crude reached a peak of $140 per barrel in March 2022. Due to this, the oil refiners registered losses as petrol and diesel rates have been unchanged since May 2022. The refiners may not lift the freeze on prices this year, as per analysts.
While Oil and Natural Gas Corporation (ONGC) reported a growth of 102 per cent in net profit in the June quarter, but Reliance Industries witnessed a decline on net profit on weaker oil-to-chemicals (O2C) business, despite steady growth in retail and telecom arms.
The diversified conglomerate's O2C's revenue declined 17.7 per cent at ₹1,33,031 crore in the quarter-under-review, compared to ₹1,61,715 crore in the year-ago period. Reliance said the lower O2C revenue was ‘’primarily on account of sharp reduction in crude oil prices and lower price realisation of downstream products. This was partially offset by higher volumes.''
The country's largest refiner - Indian Oil - reported a standalone net profit of ₹13,750.44 crore in the June quarter, while operational performance improved as earnings before interest, taxes, depreciation and amortization (EBITDA) increased 44.5 per cent sequentially to ₹22,163 crore. The average Gross Refining Margin (GRM) for the period April- June 2023 was $8.34 per bbl.
Domestic brokerage frim Motilal Oswal said in its Q1 results review report that the oil and gas sector so far has reported mixed results. ‘’The underperformance of Reliance Industries has been led by weak transportation fuel cracks and lower downstream chemical margins," said Motilal Oswal.
Meanwhile, leading city gas distributers (CGDs) including Indraprastha Gas, Petronet LNG, Mahanagar Gas, GAIL also reported mixed results. Brokerages had estimates that the companies will report steady growth in terms of margins and volumes due to reduction in administrative price mechanism (APM) gas prices. Indraprastha Gas reported a consolidated net profit of ₹522 crore for the June quarter, which was an increase of 8.47 per cent from ₹481.2 crore clocked in the corresponding quarter of last year.
Additionally, GAIL reported a decline of 45 per cent in consolidated net profit at ₹1,793 crore, compared to ₹3,250 crore in the corresponding period last year. During the quarter-under-review, the natural gas transmission volume registered a growth of seven per cent to 116.33 million metric standard cubic meter per day (MMSCMD), compared to 108.23 MMSCMD in Q4 FY23.
Going forward, brokerages expect the gas distribution firms to report steady margins on lower gas prices. ‘’With the implementation of the Parikh Committee's recommendations, domestic natural gas costs have moderated significantly, resulting in better margins and profitability for the company. Going forward, we expect margin to expand due to falling domestic gas prices,'' said domestic brokerage firm Geojit Financial Services.
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