Higher crude realisation to scale up oil cos Q1 earnings

Moneycontrol Bureau
Despite teething problems like slower gas production at Reliance Industries (RIL) and royalty and cess disputes between ONGC and Cairn India , the oil and gas is not on slippery ground.
Numbers for the April-June quarter for the sector are likely to be good q-o-q, essentially led by higher crude realisation and higher refining and petchem margins.

 Crude oil continued its upward journey during the quarter by averaging at around USD 117/bbl Continued unrest in Libya coupled with expectations of tightening of the global oil markets has led to highest crude oil prices since 2008. Petroleum product crack spreads further improved during the quarter, aiding refining margins. Gasoline-crude spreads witnessed an expansion during the quarter from USD 12.7/bbl to USD 15/bbl., q-o-q.
Following are what investors can expect from the first quarter results of RIL, ONGC and Oil India
On the back of strong macro environment, RIL is likely to report a better set of numbers during the quarter. Its net sales will grow 35.5% y-o-y at Rs 78,899.2 crore. Its EBITDA margin will decline by 315 basis points to 13%. Its net profit will grow 17% to Rs 5,895 crore. Analysts have an 'accumulate' rating on RIL stock with a target of Rs 1,036 despite its KG-D6  block’s output slipping due to technical problems to about 52 mcmd from 60 mcmd in y-o-y.
ONGC will also see a muted growth in its sales on the back of the provisional estimate of 33% subsidy share for upstream companies. Its sales will yet grow 10% at Rs 15,017.9 crore. Its net profit will also grow 10%. Marketmen have a ‘buy’ rating on the stock with a target price of Rs 345.
Oil India is likely to report good set of numbers on account of expansion in net realisation during the quarter with higher volumes from its Namaligarh refinery. It will see a huge jump in its sales and profits as the refinery was shut during the corresponding quarter of previous year. Industry experts expect Indian Oil’s net realisation during the quarter to stand at USD 59.5/bbls, up from USD 50/bbls y-o-y.
Following are views of some brokerages on oil and gas earnings expectations in April-June quarter.
IIFL: "Refining margins have been higher on a sequential basis on account of improvement in gasoline spreads, which will result in better performance of RIL’s refining segment. Crude oil production from MA-1 field and gas production from KG-D6 field are likely to be tad lower on a sequential basis. Sharp y-o-y jump in production from Rajasthan field would lead to robust results for Cairn India and will translate into higher total production for ONGC. APM gas price hike will further improve ONGC’s performance.
Prabhudas Lilladher: “Singapore complex GRMs strengthened during the quarter which is expected to aid the performance of the Indian refiners. Strength in the Singapore complex margins is largely on account of increased spreads of the key products- Gasoline, Gasoil and Kerosene. Singapore Complex GRMs averaged at USD 8.8/bbl from USD 7.4/bbl q-o-q.