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Contrasting Oil & Gas

Upstream and downstream companies in the oil sector produced completely different results

Oil marketing companies have faced the pain of continuous subsidy losses and fluctuation rupee, but upstream companies fared well. Read the sector report to understand why the highly combustible oil & gas sector has posted mixed results.

Q2FY11 turned out to be a fantastic quarter for upstream PSU oil companies which saw healthy bottomline growth. By contrast, oil marketing companies were gored by continuing subsidy losses.

ONGC reported a 60 per cent jump in its net due to higher realisations. Oil India Ltd. saw its bottomline rise by 24 per cent on the back of both higher realisations and record high volumes.

While ONGC’s subsidy burden fell in the September 2011 quarter, Oil India’s burden doubled in the same quarter. What helped Oil India tide over the increased burden was its record turnover (it is within touching distance of producing one million tonnes per quarter). ONGC’s net realisations after subsidies increased by 33 per cent (y-o-y) to $83.70 per barrel while that of Oil India were higher by 36.5 per cent at $86.27 per barrel.

The picture was different for downstream companies. With the government yet to provide any of the oil marketing companies any cash subsidy in Q2, HPCL reported a net loss of Rs 3,364 crore, BPCL reported a net loss of Rs 3,229.27 crore while IOC suffered a record quarterly loss of Rs 7,485.55 crore on sales of diesel, domestic LPG and kerosene. At current prices, these PSUs incur a loss of Rs 9.27 per litre on diesel, Rs 26.94 per litre on kerosene (sold through PDS), and Rs 260.50 per cylinder used by domestic households for cooking.

Reliance Industries posted a 16 per cent rise in its Q2 net as higher refining margins made up for lower gas output and low margins from petrochemicals. Refining margin was up 28 per cent (y-o-y).