IGI Logo

Lower dry wells and DD&A drive PAT beat; production grows

* Q4FY22 S/A revenue/EBITDA/APAT of Rs44.8bn/Rs19.6bn/Rs16.3bn beat our estimates by 2%/10%/16%. EBITDA beat was led by Rs185mn of negative dry well write-offs. PAT was led by low DD&A at Rs2.1bn (down ~50% yoy/qoq), partly offset by low other income.

* Nominated block (NB) crude output rose 5% yoy to 0.743mmt (3% beat), while gas was up 15% at 0.703bcm (5% beat). Transportation income was down 9% yoy at Rs709mn. Gas sales/production ratio fell to 76% vs. 80-85% usually.

* NB crude realization rose 25% qoq to USD98.1/bbl, with a USD1.5 discount to Brent vs. USD0.8/bbl in Q3. Gas realization was in line at USD3.1/mmbtu. NRL’s basic GRM was strong at USD25.3/bbl, with PAT up 20% yoy at Rs11.3bn in Q4.

* We lower our FY23E/24E EPS by 13%/14%, factoring in higher opex and revenue realignment. Accordingly, we lower our DCF-SOTP based TP by 9% to Rs305, factoring in lower dividends from NRL due to capex. Retain Buy rating.

Highlights:

Standalone employee costs were 29% below our est. (down 22% yoy/9% qoq), but Other Expenditure was 20% above our estimate due to higher sundry expenses and provisions (down 5%/8%) in Q4FY22. DD&A was down due to a 70% decline in depletion. Other Income fell 63% yoy to Rs4.9bn, a 34% miss (from lower dividends). The tax rate was lower at 20%. For FY22, OIL reported S/A EBITDA/PAT of Rs53.7bn/Rs38.9bn, up over 4x/2x, driven by higher realizations. Gas production was up 15%, while crude rose 2%. Capex was Rs42.8bn, while standalone gross debt was down 26% at Rs116.4bn. The board has recommended a final dividend of Rs5/sh (Rs9.25/sh interim, implying ~40% annual payout). Consol EPS for FY22 was up 1.6x yoy at Rs51.8/sh. FY22 consol debt was Rs167bn. NRL’s FY22 EBITDA/PAT was Rs50.5bn/Rs35.6bn, up 16%/17%. Basic GRM was USD14.3/bbl, while volumes fell from 2.7mmtpa to 2.6mmtpa yoy.

Guidance:

OIL aims to raise crude output from 3mmtpa currently to 4mmtpa in NB by FY25 through an accelerated drilling program (75 wells in 4 years). The plan has been vetted by D&M. Eight wells have been drilled in FY22. In Russia, Vankor, Taas and License 61 operations are going on normally and OIL is hopeful of repatriating dividends due in Jul’22. NRL is a diesel refinery with 69% slate (petrol ~15%). OIL expects very high margins this year. The excise benefit was Rs35bn in FY22. NRL capex was revised due to a change in configuration and the inclusion of petchem units (like PPU). OIL has already spent Rs40bn out of the committed capex of Rs166bn (Rs280bn total project capex). OIL’s FY23 capex guidance is Rs43bn. There was no discussion on any windfall taxes or subsidy burden.

Valuation:

We value OIL on a DCF-based SOTP that includes standalone, NRL (using DDM) and Mozambique upsides. Investments are valued at our TP or CMP, with a 30% holdco discount. Key risks: adverse oil-gas prices, policy issues, local tensions, cost overruns, operational outages and dry holes.

To Read Complete Report & Disclaimer Click Here

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354

Above views are of the author and not of the website kindly read disclaimer