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.
Energy: Sector skids as crude surges - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 10, 2000

    Energy: Sector skids as crude surges

    The scorecards of the big three oil companies for the second quarter of FY01 are out. With the continuing rise in oil prices the reports do not make a pretty picture.

    The oil companies have reported a significant growth in turnover due to the increase in petroleum product prices. The Government has increased prices twice since January '00. Consequently, realisations YoY have increased; resulting in strong growth rates.

    (Rs m) 2QFY00 2QFY01 2QFY00 2QFY01 2QFY00 2QFY01
    Sales 221,470 300,796 76,001 108,968 75,898 117,062
    Other Income 1,168 1,530 318 359 158 607
    Expenditure 204,668 281,887 71,692 101,613 69,987 112,690
    Operating Profit (EBDIT) 16,802 18,910 4,309 7,355 5,911 4,372
    Operating Profit Margin (%) 7.6% 6.3% 5.7% 6.7% 7.8% 3.7%
    Interest 2,596 4,113 415 699 246 1,030
    Depreciation 4,102 5,520 1,404 1,697 2,409 1,064
    Profit before Tax 11,272 10,807 2,808 5,318 3,414 2,885
    Tax 1,394 1,027 740 1,729 921 660
    Profit after Tax/(Loss) 9,878 9,780 2,068 3,589 2,493 2,225
    Net profit margin (%) 4.5% 3.3% 2.7% 3.3% 3.3% 1.9%
    No. of Shares (eoy) 389 779 150 150 226 339
    Diluted Earnings per share* 50.7 50.2 55.1 95.7 29.4 26.3
    P/E Ratio   2.4   1.8   3.9

    Oil company woes that started in FY00 have continued in the current fiscal. In fact, the first half of FY01 has been even tougher with crude oil prices touching new ten year highs of $35/ barrel (Brent). This has put severe pressure on the refining margins of oil companies. Consequently, they all have reported a drop in OPM. The rise in OPM for Bharat Petroleum (BPCL) is due to extra-ordinary items. However, when adjusted for it shows only a marginal drop of 20 basis points.

    The woes of the big three did not end there. They have the Oil Coordination Committee (OCC) to deal with, which fixes the import parity prices for petroleum products. The prices may not have been a true reflection of the prices in the international markets, adversely affecting the refining margins.

    Further, with the oil pool account (OPA) in deficit the reimbursement of subsidy (on diesel, kerosene and LPG) did not come through. This disrupted their working capital cycle. Consequently, the companies had to resort to short term debt to overcome any shortfall in cashflows. This impacted their interest burden.

    With the ensuing winter months in the northern hemisphere the demand for petroleum products is expected to remain strong. Consequently, prices are not expected to weaken till the end of 4QFY01. This will maintain the pressure on the refining margins of oil companies; affecting their bottomline.

    Any further rally in oil prices will put pressure on the OPA, which will affect the working capital requirements of these companies resulting in higher interest costs. It will also put downward pressure on the existing refining margins.

    The oil companies do not have much to cheer about, as the outlook for FY01 does not look very bright unless there are subsequent rounds of price increases. Consequently, we have downgraded the earnings outlook of oil companies in our research sections.



    Equitymaster requests your view! Post a comment on "Energy: Sector skids as crude surges". 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

    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.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    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.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    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


    Aug 21, 2017 (Close)