After a strong H1FY24, the operating profits of the state-owned oil marketing companies — IOC, BPCL and HPCL– may fall significantly on quarter in the October-December period (Q3FY24) owing to inventory losses and lower gross refining margins, as per analysts.
According to Emkay Global, OMC’s diesel marketing margins fell to negative Rs 0.5 per litre, while petrol margins improved by 20% to Rs 6.8 per litre in the third quarter of FY24.
“Brent averaged at around $84 per barrel in Q3FY24, down 3% on quarter, closing around $19 per barrel lower at $78/bbl between the two quarter ends, thereby resulting in refining inventory losses of $2.5-3 per barrel for OMCs,” the firm said.
The gross refining margins of the three OMCs also fell to $5-6 per barrel from $9-10 a barrel on quarter in Q3FY24 due to a correction in distillate spreads. “We expect OMCs to record a 70-80% decline in EBITDA on quarter. Q3FY24E PAT (profit after tax) for IOCL is estimated at Rs 2600 crore, while BPCL and HPCL would see PAT of Rs 6,000 crore and Rs 2,000 crore, respectively,” according to Emkay Global.
Kotak Institutional Equities also expect a sharp decline of 54-65% on quarter in EBITDA for the three OMCs. However, with the softness in crude prices last quarter and retail auto fuel prices being capped, the marketing earnings of OMCs shall remain strong, ICICI Securities said in its report.
However, marketing margins on petrol and diesel have continued to remain strong amid a fall in benchmark prices with a gross marketing margin of Rs 9.1 per litre and Rs 1.2 per litre on petrol and diesel respectively, as per analysts at Prabhudas Lilladher.
In the first two quarters of the financial year, the three OMCs have been able to make healthy profits compared to the first half of the last fiscal primarily on the back of improved marketing margins.
The three OMCs reported a combined consolidated net profit of Rs 27,783.59 crore in the quarter ended September against a cumulative loss of Rs 3,724.39 crore in the same period a year ago.
For upstream companies, the operating profitability is however likely to remain flat with muted volume growth and unchanged reallisations, analysts believe.
“We expect EBITDA to be flat for both ONGC and Oil India,” Kotak Institutional Equities said. “With a windfall tax on oil and a ceiling price on APM gas, upstream realizations are capped and have only minor variations.”
The firm also sees crude oil production and sales by the two companies largely flat, with around 5% rise on quarter in Oil India’s gas volume.
EBITDA of upstream companies is likely to reflect a small improvement of 2% on quarter due to improvement in oil and gas production and lower operational expenditure, as per ICICI Securities.