Oil India’s outlook boosted by firm oil and gas realisations, rise in output

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Oil India Ltd, along with other upstream producers, have been benefitting from higher crude oil prices.

Average crude oil price realisation for the September ended quarter (Q2) was at $71.35 a barrel, much higher than $42.75 in the year-ago quarter period. Realisation during the first half of the current fiscal was at $69.28 barrel, again much better than $36.48 a barrel seen during the first half of FY21.

Among other positives, rising production has also helped. Crude production during the quarter was at 0.75 MMT, marginally higher than 0.74 MMT in the previous quarter and 0.74 MMT in the year-ago quarter. MMT stands for million metric tonne.

Gas production on the other hand showed a strong uptick. At 0.81 bcm (billion cubic meters), output was significantly higher than 0.71 bcm in April-June and 0.64 bcm in the year-ago period.

Analysts said the combined production at 1.57 MMT reached levels last seen in 2QFY20, though was slightly lower than estimates. Analysts at Antique Stock Broking Ltd said, with weaker than expected production in September month, the combined production was short of their expectations.” Going ahead, this will be resolved.

A significantly higher oil realisation and 1.78% and 26.38% year-on-year rise in oil and gas production, respectively, pushed up revenues and operating performance. Net sales grew almost 53% year-on-year, while Ebitda was up 24% year-on-year. Ebitda stands for earnings before interest tax depreciation and amortisation.

The outlook remains strong, with high crude oil realisations supporting performance. “Our estimates factor in crude oil realisation of $70/barrel for FY22-24,” said analysts at Prabhudas Lilladher Research.

Even domestic gas prices have been revised upwards for the second half of FY22 and these are to benefit earnings.

Overall analysts at Sharekhan say that “Business fundamentals have turned positive with oil prices at $82/barrel and an expectation of steep hike in domestic gas price for H1FY2023. Oil/gas production guidance of 3.1mmt and 2.9-3bcm implies 4.6% and 9.8%-13.6% y-o-y growth for FY2022 “

Oil India shares surged over 3% in early deals on Friday.

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