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Gas takes a breather; oil steals the show

We estimate the oil & gas sector’s aggregate EBITDA would increase by 57% YoY/28% QoQ given OMCs’/ONGC’s high GRMs/higher realisations. We anticipate CGDs’ EBITDA would dip by 21% YoY owing to high input spot prices (~4x YoY) and modest volume.

We anticipate OMCs’ EBITDA would rise 46.7% YoY as both the marketing and refining segments are likely to perform better due to strong throughput and better GRMs. Higher oil realisations and modest production would spur up ONGC’s EBITDA by 1.8x YoY. Gas transmissions’ EBITDA is likely to surge 1.7x YoY (off a low base) due to modest margins and volume uptick from pent-up demand. PLNG would remain muted (-16% YoY) led by weak Dahej utilisation of 90%.

IGL/MGL YoY volume surges; GAIL to clock high petchem margin

We estimate IGL’s EBITDA margin would remain muted at INR7.9/scm (-8.6% YoY) as it had to procure high-priced spot LNG (~4x YoY) amid weak APM allocation in Nov-21. IGL/MGL volumes would remain strong at 7.3mmscmd (+16.7% YoY)/ 3.2mmscmd (15.5% YoY). While GGL’s margins are likely to remain muted (-51% YoY) led by high spot LNG prices, its volume would remain weak at 11.1mmscmd (-3% YoY). They are also changing their input gas mix to other available cheap fuels, which would improve their margins. GAIL’s EBITDA would surge by ~1.9x YoY led by strong NG transmission and petchem margins. GSPL’s EBITDA should remain muted (-17.6% YoY/ 13.7% QoQ) owing to weak volumes, down 15% YoY to 33.5mmscmd.

OMCs: Strong marketing margins with recovery in refining GRMs

We estimate GRMs (including inventory gains) would increase to USD7.5/7/7 per bbl for IOCL/BPCL/HPCL in the wake of increase in oil prices and improved demand across the slate. These companies should report marginally modest inventory gains in Q3FY22 due to rising oil prices. While domestic retail sales are likely to remain flat YoY, rising retail prices would keep marketing margins healthy at INR8/litre (up 12% YoY) for diesel and INR10/ltr (up 2% YoY) for gasoline. This would benefit HPCL the most given its higher exposure to the segment.

Gas transmission: Surge likely with strong volumes

PLNG is likely to clock a 7% YoY fall in volumes, which would hurt EBITDA by 16% YoY led by lower utilization at Dahej. The government has accelerated the licensing process for new geographical areas (GAs) with bidding carried out in Dec-21 and their allocation scheduled for Feb- Mar’22. Accordingly, new GAs would supplement volume growth. We estimate CGDs would post volume CAGRs of 10–14% over FY22–25E.

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