Reliance, ONGC, and Indian Oil shares gain but Street cautious on BPCL after oil hits 6-month low

Shares of oil and gas companies — Reliance Industries (RIL), Bharat Petroleum Corporation Limited (BPCL), Indian Oil Corporation, and Oil and Natural Gas Corporation (ONGC) — traded mixed on Monday after a few of them reported earnings in the week gone by while oil prices dropped near multi-month lows.

Sectoral index BSE Oil and Gas dipped more than a percent in intraday but was up 0.2 percent on BSE at 12:13 pm.

The overall downtrend in the oil and gas pack comes on a day when brent crude slipped to a six-month low as recession fears hurt the demand outlook. Front-month prices hit the lowest levels since February last week, tumbling 13.7 percent and posting their largest weekly drop since April 2020. In the previous week, US crude fell 9 percent while brent gave up 14 percent to pre-Russia-Ukraine conflict levels.

Meanwhile, data also pointed to a slow recovery in China's crude imports last month.

According to Australia and New Zealand Banking Group, global oil demand for 2022 is now estimated to rise by 1.8 million barrels per dollar (bpd) year-on-year and settle at 99.7 million bpd, just short of pre-pandemic highs.

Independent market expert Kush Ghodasara, said sliding oil prices positively impact most sectors, excluding OMCs. "Sliding oil prices will cut down fuel costs and transportation costs for most the sectors, which will help improve the margins of the companies. Therefore, sliding oil prices this quarter will help tame inflation, which could result in a growing economy," he said.

The mixed trend in the stocks also reflects the impact of earnings of the companies for the April to June 2022 quarter.

State-owned Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) posted a combined loss of Rs 18,480 crore on holding petrol and diesel prices despite a rise in cost.

According to stock exchange filings by the three fuel retailers, the losses were due to erosion in the marketing margin on petrol, diesel and domestic LPG.

BPCL posted a loss of Rs 6,290 crore, much higher than Street estimates. Revenue went up 16 percent at Rs 1.2 lakh crore versus the previous quarter, with its refining segment doing better than estimates. It also registered earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss of Rs 5,901 crore.

BPCL's gross refining margin (GRM) — the difference between the total value of petroleum products coming out of an oil refinery and the price of the raw material that is crude oil — came in at $25.6 per bbl for the June quarter against $22.6 per bbl in the last quarter of the previous fiscal year.

Following the financial results, the BPCL shares declined to 5 percent in intraday trade. Global brokerage Jefferies cut its target price on the stock to Rs 410 per share from Rs 465 earlier. This means the brokerage sees a 22 percent upside in the stock from Friday’s closing price.

Hindustan Petroleum Corporation Ltd (HPCL) clocked its highest quarterly net loss of Rs 10,196.94 crore in the June quarter as a freeze on petrol and diesel price revision wiped away refining margin.

Its revenue rose 17 percent to Rs 1.1 lakh crore versus the previous quarter. However, it recorded an EBITDA loss of Rs 12,495 crore. HPCL stock fell more than 6 percent in intraday trade, after its results on Saturday.

Oil marketing companies (OMCs) are losing Rs15 per litre on marketing margin.

Mahanagar Gas saw its revenue jump 34 percent sequentially to Rs 1,454 crore and profit after tax increased 40 percent on a quarter-on-quarter basis to Rs 185 crore. Its EBITDA rose 33 percent to Rs 285 crore from April to June 2022, against the previous quarter.

The gas company's shares advanced nearly 5 percent in today's trade.

Petronet LNG's revenue for the period under review jumped 28 percent on a quarterly basis to Rs 14,263 crore, while PAT slipped 7 percent to Rs 701 crore against Rs 751 crore in the last quarter. The company's EBITDA was 9 percent lower sequentially at Rs 1064 crore.

The company said it is facing challenges with respect to new businesses i.e CBG following a "lack of government support." It plans to tone down ambitious plans in new businesses and expects better utilisation once spot LNG prices cool off, the firm said. After the Q1 results, the stock gave more than 3 percent in intraday trade.