With stocks of all state-owned oil marketing companies (OMC) surging to lifetime highs on Thursday, the BSE Oil & Gas index rose to an eight-year high level. The gauge closed at 12,160.14 up 2.64%, while the Sensex ended the session at 28,106.21, down 0.41%. In 2016 so far the BSE Oil & Gas index has gained 27.26%, outperforming the Sensex which was up 7.61% during the same period. Barring Castrol India whose stock was down around 2.68%, shares of all companies ended the trading session in green. Leading the pack was Indian Oil Corporation(IOC) whose shares jumped around 5% to close at `649.45. This was followed by Hindustan Petroleum Corporation whose stock was up around 4%.
Shares of other companies like Indraprastha Gas, Bharat Petroleum Corporation, GAIL (India), Reliance Industries (RIL) and Oil and Natural Gas Corporation(ONGC) were up between 0.3% and 4%. Of the 10 companies in the BSE Oil & Gas index, as many as six companies touched a fresh 52-week high.
In FY16, the largest private refiner RIL reported a higher gross refining margin (GRM) of $10.8 per barrel. While
HPCL saw the GRM double to $6.68 per barrel, BPCL too saw almost a similar jump — from $3.62 per barrel in FY15 to $6.59 per bbl. Refining margin refers to the earning from extracting fuels like petrol and diesel from crude oil.
However, analysts seem skeptical about quarterly performance for oil explorers for the three months to September. Analysts at Kotak Institutional Equities observed that OIL and ONGC might report a modest q-o-q decline in EBITDA despite steady volumes and realizations, reflecting an increase in operating costs over the previous quarter. “We expect GAIL to report steady EBITDA q-o-q, as lower contribution from gas trading and LPG segments will likely be offset by higher contribution from petchem and gas transmission segments,” the report noted.
The brokerage further said, “We expect OMCs to report sequentially lower net income reflecting lower refining margins and lack of adventitious gains that boosted 1QFY17 results. We expect RIL to report sequential decline in profitability led by weaker refining margins, partially offset by an improvement in petchem margins and higher refining and petchem volumes.”