Oil & Gas Q1 Results Preview: GAIL, Petronet To Buck The Trend Of Weaker Profits
Here's how the brokerages believe the oil and gas companies would have fared in the first quarter of fiscal ending March 2025.
Indian oil marketing companies like Hindustan Petroleum Corp., Bharat Petroleum Corp., Indian Oil Corp. as well as city gas distribution companies may post weaker earnings for the first quarter of the fiscal ending March 2025.
However, GAIL (India) Ltd. and Petronet LNG Ltd. could be the only outliers to report improved financials as per brokerages.
Upstream Companies: RIL, Oil India, ONGC
Reliance Industries Ltd. may post a weak first quarter sequentially due to lower gross marketing margins and muted growth in Reliance Jio and Reliance Retail, according to Kotak Securities. The brokerage expects the company's consolidated Ebitda to decline 8% quarter-on-quarter, driven by weaker performance in the oil-to-chemicals segment.
Nuvama Research maintains a similar view and expects Reliance Industries consolidated Ebitda to fall 7% quarter-on-quarter, with a strong performance across all verticals except oil-to-chemicals.
For oil exploration and production companies like Oil and Natural Gas Corp. and Oil India Corp., Kotak Securities expects higher windfall taxes to offset the benefits of increase in oil prices. Brent crude prices are up over 14% year-to-date; however, the government's windfall taxes capped the company's realisation at around $75 per barrel of oil.
ONGC's Ebitda may decline 6% sequentially in Q1 of fiscal 2025 on lower net oil realisation and lower oil production, states Kotak Securities.
Oil Marketing Companies: HPCL, BPCL, IOCL
Higher forward valuations reflect Bloomberg's consensus earnings estimates for India's oil marketing companies to be lower in fiscal 2025.
HPCL, BPCL, and IOCL could see a 35–43% quarter-on-quarter decline in Ebitda in the first quarter of fiscal 2025, said Kotak. This is because of weaker gross refining margins and the impact of the Rs 2 per litre price cut undertaken by the OMCs in March 2024.
Singapore GRMs, the global refinery industry's benchmark, fell 53% sequentially in Q1 FY25 due to weak global product cracks.
City Gas Distributors
The volume growth of city gas distribution, or CGD, is expected to be robust during the June quarter, although per unit margins for companies may decrease. Nuvama Research anticipates annual volume growth of 8–10%, driven by a Rs 2.5 per kg price reduction, increased private vehicle adoption, and expansion into new geographical areas.
Gujarat Gas could see higher annual margins but a sequential decrease to Rs 6 per standard cubic metre, Nuvama said.
Kotak Securities forecasts Mahanagar Gas's unit Ebitda to decline further to Rs 10.5 per standard cubic metre and Indraprastha Gas's gross margin to decrease quarter-on-quarter.
Gujarat State Petronet might experience a substantial earnings impact from a 47% tariff reduction. Despite Kotak Securities projecting an Ebitda decrease of 19% quarter-on-quarter, the brokerage anticipates 11% volume growth over the same period.
The Outliers: Strong Quarter For GAIL, Petronet
GAIL (India) may be one of the few oil and gas counters that will report a strong quarter. Kotak Securities expects the company's Ebitda to surge 16% and 14% on an annual and sequential basis, respectively. The increase would be primarily due to higher transmission segment volumes, an uptick in the petrochemical segment, higher utilisation, and a softening of LNG prices.
Nuvama Research also holds similar views, with the exception that shutdowns may affect the petrochemical and LNG segments in 1QFY25.
Brokerages expect Petronet LNG's Ebitda to increase 13–17% year-on-year. Growth is expected due to higher utilisation levels at the company's Dahej terminal. Utilisation is now at 100%, up from 98% previously.
