X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Oil & gas: Same industry, different fates - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 30, 2008

    Oil & gas: Same industry, different fates

    A value-chain describes the flow of activities within an industry. The oil and gas industry value chain is organised into exploration (upstream), transmission (midstream) and refining, petrochemicals and marketing (downstream). In this article, we shall look at how the profitability of the companies operating in the Indian oil and gas industry changes as we move along the value chain.

    4QFY08 OPM NPM
    Upstream
    ONGC 37% 17%
    Midstream
    IGL 42% 26%
    GAIL 24% 15%
    Gujarat Gas* 21% 14%
    Petronet LNG 12% 7%
    Downstream
    Castrol* 23% 15%
    RIL 16% 10%
    Chennai Petro 8% 4%
    BPCL 3% 0%
    HPCL 1% 1%

    Source: Equitymaster Research
    * 1QCY08

    Upstream
    The upstream segment is currently enjoying favorable conditions due to the buoyant crude prices. However, it also has to subsidise roughly 1/3rd of the under recoveries of the downstream oil marketing companies. Although ONGC has reported strong operating margins (OPM) and net profit margins (NPM), they aren't as high as they should be.

    Midstream
    The midstream segment (the companies mentioned handle natural gas; much of the oil midstream capacity is owned by IOCL) is doing 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. City gas distribution companies (IGL and Gujarat Gas) compete with the downstream oil marketing companies (OMCs) but enjoy freedom in pricing which gives them high margins. Petronet LNG is at the bottom of the pack because it imports and then regassifies liquid petroleum gas using high cost technology.

    Downstream
    The downstream segment has two distinct types of players. The public sector OMCs (IOCL, BPCL, HPCL) and the others. The OMCs are in an extremely difficult position as the high crude price gets passed on to them as input cost and at the same time, government interferes in setting the output prices. As a result, they are unable to recover the cost and suffer huger operational losses.

    The other players have avoided similar fates. Castrol sells lubricants. This part of the downstream segment is unregulated and the company enjoys brand loyalty. This reflects in its margins. Chennai Petro is a pure refiner and is not affected by the bugbear of underrecoveries, as it does not market its own refined products. RIL's main business is refining, and petrochemicals as its upstream business operations is yet to come on stream and contribute significantly. In the refining business, it has avoided the fate of the PSU OMCs by exporting most of its refined products. It is also able to absorb the high crude price in its petrochemicals segment as it can be passed on the ultimate consumer.

     

     

    Equitymaster requests your view! Post a comment on "Oil & gas: Same industry, different fates". Click here!

      
     

    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Oil India Ltd: A weak quarter (Quarterly Results Update - Detailed)

    Jan 24, 2017

    Oil India Limited announced results for the quarter ended September 2016. The company has reported an 6.5% and 7.8% Year on Year (YoY) decline in sales and net profit respectively during the quarter.

    GAIL: A Robust Quarter (Quarterly Results Update - Detailed)

    Dec 3, 2016

    GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 16 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY.

    ONGC: Lower Write-offs Support Performance (Quarterly Results Update - Detailed)

    Nov 3, 2016

    ONGC has announced results for the quarter ended September 2016. The company has reported 10.3 % year on year (YoY) decline in sales, while bottom-line grew 6.3% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE OIL & GAS


    Aug 18, 2017 (Close)

    S&P BSE OIL & GAS 5-YR ANALYSIS

    COMPARE COMPANY

    MARKET STATS