Oil India share price slipped 2.3% on Monday morning as investors reacted to the 97% fall in the consolidated net profit of the leading natural gas and crude oil exploration company in the April-June quarter.
Oil India share price slipped 2.3% on Monday morning as investors reacted to the 97% fall in the consolidated net profit of the leading natural gas and crude oil exploration company in the April-June quarter. Oil India shares were down to trade at Rs 97 per share. The fall in revenues resulted from the reduction in oil and gas prices and sharply lower gas and oil realizations. Crude oil production for Oil India was down 8% on-year basis and gas production slipped 4% on year. Oil India also took a Rs 93 crore hit Baghjan blowout, which was marked as an exceptional expense.
Total income for the company stood at Rs 1,879 crore in the April-June quarter, down from Rs 3,506 crore in the same period a year ago. Despite shrinking revenues, expenses were still high for Oil India. Consolidated total expenses of Oil India were at Rs 2,095 crore. The standalone Revenue stood at Rs 1,743 crore bringing the EBITDA Margin to 11.3%. “EBITDA declined 54% on-quarter basis to Rs 312 crore, despite anticipated moderation in operating costs from the previous quarter. Adjusted net loss was at Rs 160 crore, further impacted by sequentially lower other income due to lack of dividends,” said Kotak Securities in a note.
Gas prices are expected to decline, according to analysts, which could be a worry for India. The public-sector entity, analysts say can not bode well in a lower oil and gas price environment. Costs have increased for Oil India over the years with blended production and operating costs excluding statutory levies surging to $13.4/bbl in the previous fiscal year from around US$10/bbl in financial year 2016-18. Analysts at Kotak Securities have a ‘Sell’ call on the stock with an unchanged Fair Value of Rs 70, based on 10X P/E multiple on standalone FY2022E EPS plus the value of investments. “ Our reverse valuation exercise suggests that the stock is already discounting Dated Brent crude price recovering to ~US$50/bbl, providing limited leverage to any improvement from current levels,” the brokerage said.
According to the latest shareholding data on the stock exchanges, foreign institutional investors have increased their shareholding in the company to 7.2% from 6.6% in the previous quarter. Domestic institutional investors, on the other hand, have trimmed stake to 18.8% from 19.2% in the previous quarter. Oil India’s management retains capex guidance of Rs 38-39/40-42 billion for financial year 2021 and 2022, though there may be some shortfall. Oil India’s dividend payout may fall as well. Brokerage and research firm, emkay Global has retained its target price of Rs 95 on the stock and has placed a ‘Hold’ call. “Key risks are adverse oil-gas prices, policy issues, local tensions, cost overruns, ETF divestment, operational outages and dry holes,” it said.
The exceptional item on Oil India’s books, the blowout at the Baghjan field did hurt the bottom line. On May 27, Oil India witnessed a blowout at Baghjan field during workover operations, which reported production loss of about 72mmscm of natural gas. Although production of oil and gas is expected to be lower, brokerage firm Motilal Oswal said that the stock trades at 5.6x FY22E EPS of Rs 17.8 and at a ~30% discount to its long-term PE average, with a strong dividend payout of >50%. Motilal Oswal has a ‘Buy’ call on the stock with a target price of Rs 115.