OIL India earns record profits in Q2FY12

Riding on the back of better realisations and higher output, India’s 2nd largest state-run oil & gas explorer, OIL India, has reported its highest-ever quarterly net profit of Rs 1138.52 cr during July-September of the current financial year, implying a growth of 24.3% over last year's profit of Rs 916.03 cr. 

The gross income of the company spiked 50.11% to Rs 3952.58 cr in the 2nd quarter this year, against Rs 2633.20 cr in the same period last year.

Commenting on the results, OIL India's Chairman and Managing Director, N M Bohra said, “Production in Q2 was a record 0.991 MT, up from 0.939 MT a year ago”. He further added, “OIL may cross the magical number of 4 MT this fiscal, against 3.49 MT last fiscal”. 

During the July-September quarter, led by higher crude oil prices, the company achieved gross realisations of USD 112.48/barrel, After calculating the oil subsidy payout, this translates to a net realisation of USD 86.27 for every barrel. This was despite a whopping 111.43% jump in the subsidy outgo of Rs 844.44 cr in Q2, against Rs 399.4 cr last year. During the second quarter of 2010-11, OIL India had recorded a gross crude oil price of USD 75.48/barrel and net realisation of USD 63.17/barrel.

The management also said that OIL India is contemplating buying Etablissements Maurel & Prom SA’s oil assets in Gabon, after considering a tie-up with the govt. company. The company is also scouting for shale gas assets in Latin America, United States and Australia. However, the management did not divulge any further details on its expansion plans.

On the valuations front, at a CMP of Rs 1278.85, the counter is currently trading at 7.73x its annualised EPS of Rs 165.36. At such cheap valuations in comparison to its peer upstream companies like GAIL (12x) and ONGC (9x), the scrip looks very attractive.

However, owing to the increasing pressure on the central govt. to address the fiscal deficit issue, a hike in the subsidy sharing bill for upstream companies like OIL India will impact their financial performance severely.