RIL's results were in line with street estimates. Net profit declined 6.4% year-on-year despite a 315.8% increase in other income, driven by higher interest income due to higher cash and cash equivalents. Profitability was impacted mainly because of the decline in gross refining margins (GRMs) to $6 per barrel from $13.4 per barrel last year. Lower GRMs resulted in a 51.4% decline in the earnings before interest and tax (ebit) of the refining and marketing business. Higher depreciation in the oil & gas and refining & marketing business resulted in a 91.5% increase in overall depreciation cost, which was above market expectations. Refining revenues increased 8.9% and formed 70.7% of total revenues. Petrochemicals revenues fell 14.2% and formed 23.8% of the total revenues, but ebit increased 15.7% and formed 45.9% of the total ebit. This was because the industry was operating on low level of inventory, resulting in higher domestic realisations. On a sequential basis, revenues from oil & gas increased 57.5%, led by higher production from KG-D6 basin and accounted for 5.2% of total revenues. However, ebit margins fell 1,233 basis points (100 basis points make one percentage point) to 41.74%. Decline in ebit margins may be due to higher depreciation.
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Cairn India's performance was more or less in line with estimates. Revenues declined 28.3%, driven by a 40.6% drop in crude price realisations and a 4.9% lower gas realisation. Appreciation of rupee hit the company. Operating performance was, however, ahead of expectations. Margins fell 1,943 basis points to 58%, impacted by higher costs. Net profit increased 60.1%, mainly on the back of one-time deferred tax reversal and write-back of provision made in the ONGC carry case, due to a favourable court judgement. Now for the public sector companies: BPCL's revenues declined 28.4% y-o-y, driven by a decrease in product prices, as crude oil prices corrected. Average crude prices dropped to $68.2 per barrel in September as compared with $114.3 per barrel a year ago. Also, the company accounted for receipt of bonds in the September quarter last year. Excluding that, revenues show a decline of 18.1%. The government regulates domestic oil prices in order to control inflation. Given that retail prices are lower than global prices, state-owned OMCs have to share the burden of the increase in prices. The government, in turn, compensates them by issuing bonds, while upstream companies offer discounts. Somewhat reassuringly, BPCL's loss at the net level has reduced considerably. Net loss stood at Rs158.77 crore compared with Rs2,625.27 crore last year. Profitability was helped by correction in crude oil prices, leading to less under-recoveries, a 41% increase in other income and a 50% decline in interest expenses.
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