OIL’s EBITDA was sharply beneath our expectations in Q4FY21 led by reduce oil and gas volumes and greater operating costs net earnings was boosted by greater dividend earnings. We raise our FY2022-23 estimates factoring in greater international crude costs and domestic gas costs. However, we retain our Sell rating with a revised SoTP-based Fair Value of Rs 125 (6X standalone FY2023e EPS plus the worth of investments), noting an uninspiring production track record, weak no cost money flow generation and muted return ratios.
Q4FY21 outcomes impacted by reduce volumes and greater other costs
Revenue was 3% beneath our estimate at Rs 25.8 bn. Ebitda was 33% beneath our estimate at Rs 4.17 bn reflecting sharp 26% q-o-q and 31% y-o-y jump in other costs due to greater price of help services and a sharp jump in miscellaneous things. Reported net earnings of Rs 8.48 bn (EPS of Rs 7.8) was boosted by (i) greater other earnings like dividends from IOCL and NRL and (ii) reduce DD&A costs. OIL accounted exceptional price of Rs 701 mn pertaining to the blowout at Baghjan.
Crude oil sales volumes declined 6% y-o-y to .703 mn tons reflecting 5.4% decline in production to .717 mn tons. Gas sales volume enhanced 4.5% y-o-y to 555 mcm, greater than .6% raise in production to 649 mcm. Net crude realisations have been in line with our assumption at $59.8/bbl and gas realisation remained steady q-o-q at $2/mn BTU.
Lower volumes & realisations mar FY21
In FY2021, revenues declined 29% y-o-y to Rs 86.18 bn and recurring Ebitda declined 60% y-o-y to Rs 18.85 bn underpinned by (i) a sharp plunge in oil and gas realisations (ii) reduce oil and gas volumes and (iii) greater operating costs. Reported net earnings fell by 33% y-o-y to Rs 17.42 bn (EPS of Rs 16.1). Crude oil realisations declined 28% y-o-y in line with benchmarks to $44/bbl. Natural gas realisations declined 40% to $2.3/mn BTU. Crude oil sales volumes declined 5.8% y-o-y and gas sales volume declined 5.6% y-o-y, each in line with the production trajectory. Net debt enhanced to Rs 146.5 bn from Rs 53.1 bn a year ago, on acquisition of extra 54.16% stake in NRL.
Raise FY2022-23e EPS on greater oil and gas costs retain SELL with FV of Rs 125
We raise FY2022-23e EPS to Rs 16.6 and Rs 16 respectively from Rs 8.3 and Rs 9.4 factoring in —(i) greater oil value of $65/bbl and $60/bbl and gas value of $2.7/mn BTU and $4/mn BTU, (ii) greater operating costs and (iii) greater debt and capex. We retain Sell and propose investors to stay away from upstream PSUs given—(i) uninspiring production record in spite of a sustained raise in capex and operating charges and (ii) restricted FCF generation and deteriorating returns.