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INTRODUCTION:

Uncovering the oil and gas industry considered to be the biggest


sector in the world in terms of dollar value, the oil and gas
industry is a global powerhouse employing hundreds of thousands
of workers worldwide as well as generating hundreds of billions of
dollars globally each year.
In regions which house the major NOCs, these oil and gas
companies are so vital they often contribute a significant amount
towards national GDP.
The oil and gas industry can be broken down into three key
areas: Upstream, midstream and downstream.
The Upstream component is also referred to as the E&P exploration
and production.
This involves search for underwater and underground natural
gas fields or crude oil fields and the drilling of exploration wells and
drilling into established wells to recover oil and gas.
Downstream refers to the filtering of the raw materials obtained
during the upstream phase. This means refining crude oil and
purifying natural gas.
The marketing and commercial distribution of these products to
consumers and end users in a number of forms including: natural
gas, diesel oil, petrol, gasoline, lubricants, kerosene, jet fuel,
asphalt, heating oil, LPG (liquefied petroleum gas) as well as a
number of other types of petrochemicals. Midstream is generally
classified under the downstream category.

STATE-OWNED COMPANIES DOMINATE OIL AND GAS IN INDIA


India has become the third-largest energy consumer in 2015 In
2015
Oil production in the country reached 0.75 mbpd as compared to
0.76 mbpd in 2014. In 2014, country had, 5.7 billion barrels of
proven oil reserves
India had 1.4 tcm of gas proved reserves and produced 33.66 bcm
of gas in 2015 which is expected to rise and reach 33.73 bcm in
2016

A. Upstream segment - exploration and production


State-owned ONGC dominate the upstream segment.
It is the largest upstream company in the Exploration
and Production (E&P) segment, accounting for
approximately 59.43 per cent of the countrys total oil
output (FY15)
B. Midstream segment storage and transportation
IOCL operates a 11,214 km network of crude, gas and
product pipelines, with a capacity of 1.6 mbpd of oil
and 10 mmscmd of gas.
This is around 30 per cent of the nations total pipeline
network
C. Downstream segment refining, processing and
marketing
IOCL is the largest company, controls 10 out of 22
Indian refineries, with a combined capacity of 1.31
mbpd
Reliance launched Indias first privately owned refinery
in 1999 and has gained considerable market share (30
per cent)
Essars Vadinar refinery has a capacity of 20 mmtpa,
currently accounting for around 10 per cent of total
refining capacity
ECONOMY ANALYSIS

The High Oil Prices Have Contributed To The Widening Of The


Current Account Deficit
India has become the third-largest energy consumer in 2015

In 2015,oil production in the country reached 0.75 mbpd as


compared to 0.76 mbpd in 2014. In 2014, country had, 5.7 billion
barrels of proven oil reserves
India had 1.4 tcm of gas proved reserves and produced 33.66 bcm
of gas in 2015 which is expected to rise and reach 33.73 bcm in
2016

In FY16, India had 232.1 MMTPA of provisional refining capacity,


making it the second largest refiner in Asia. By 2017, the oil
refining capacity of India is expected to rise and reach more than
310 million tonnes. Private companies own about 38.21 per cent of
total refining capacity

Indias energy demand is expected to double to 1,516 Mtoe by


2035 from 700.50 Mtoe in 2015. Moreover, the countrys share in
global primary energy consumption is projected to increase by two
folds by 2035

In 2014, India consumed 3.85 mbpd oil, while the consumption is


estimated to reach 4.0 mbpd by FY16, expanding at a CAGR of 3.2
per cent during FY0816F.

As per IEA estimates as on June 2015, India is expected to


overtake Japan to become the third largest oil consumer in the
world by the end of 2015

LNG imports accounted for about one-fourth of total gas demand.


India's gas demand is estimated to be more than double over the
next five years

India increasingly relies on imported LNG; the country is the


fourth-largest LNG importer in 2015 (As of September 2015) and
accounted for 5.68 per cent of global imports. In 2014-2015, crude
oil production was 38.76 million tonnes. Total crude oil production
in FY14 stood at 37.79 million tonnes.

In FY16, total consumption of petroleum products by companies


stood at around 183.5 MMT, higher by 11.2 per cent in comparison
with the previous fiscal year

The total number of retail outlets increased to 56190 (including


private) in April 2016 (Provisional) from 53419 in April 2015

IOC, as of April 1, 2016, (Provisional), owned the maximum


number of retail outlets in the country (45.14 per cent of total),
followed by HPCL (24.56 per cent) and BPCL (23.92 per cent); the
remaining being owned by private firms

As of April 1, 2016 (Provisional), there were 17,916 LPG


distributors in India

FDI INVESTMENTS IN PETROLEUM AND GAS IN INDIA


Cumulative FDI inflows in Indias petroleum and natural gas sector
stood at USD6.7 billion (2.31 per cent of total FDIs) during April
2000March 2016

In Oil & Gas, FDI inflows into the sector totalled USD6.7 billion and
USD6.6 billion in FY16 and FY15, respectively

Between FY10 and FY16(1) , FDI inflows into petroleum and


natural gas sector grew at CAGR 16.06 per cent

Industry Analysis
COMPANY OVERVIEW
Founded in 1939, Hindustan Petroleum Corporation Limited (HPCL
or the Company), a Government of India undertaking and a
Fortune 500 company, is a major integrated oil refining and
marketing company in India.
It is a Mega Public Sector Undertaking (PSU) with Navaratna status.
HPCL accounts for about 20% of the market share in India among
the PSUs.
The Company operates with 2 refineries producing a wide variety of
petroleum fuels & specialties, one at Mumbai (West Coast) having a
capacity of 6.5 Million Metric Tonnes Per Annum (MMTPA) and the
other in Vishakapatnam (East Coast) with a capacity of 8.3 MMTPA.
HPCL also holds an equity stake of 16.95% in Mangalore Refinery &
Petrochemicals Limited (MRPL), a state-of-the-art refinery at
Mangalore with a capacity of 9 MMTPA.
In addition, HPCL, in collaboration with M/s Mittal Energy Investment
Pte.Ltd. has set up a 9 MMTPA refinery at Bathinda, in the state of
Punjab, as a Joint venture.
HPCL owns the countrys largest Lube Refinery with a capacity of
335,000 Metric Tonnes which amounts to 40% of the national
capacity of Lube Oil production. Presently HPCL produces over 300+
grades of Lubes, Specialities and Greases.
HPCLs vast marketing network consists of 13 Zonal offices in major
cities and 101 Regional Offices.

Share holding Pattern of HPCL

PRESIDENT OF INDIA
0.08 FINANCIAL INSTITUTIONS
0.29 13.31 FIIs/OCBs
12.45 BANKS
0.13 51.11 MUTUAL FUNDS
8.66 NRIs
13.97 EMPLOYEES-PHYSICAL
PUBLIC

Financial Figures

Consolidated (Rs. Cr)

Particulars FY 2012 FY 2013 FY 2014 FY 2015 FY 2016


Total Income from 1,85,283 2,16,154 2,34,159 2,16,594 187,078.
Operations .86 .13 .44 .13 79

Expenses 1,81,142 2,11,981 2,28,886 2,11,899 176,439.


.22 .53 .47 .78 27

Earnings Before 4,141.64 4,172.60 5,272.97 4,694.35 10,639.5


Other Income, 2
Interest, Tax and
Depreciation
(Operating Profit)

Depreciation 1,922.15 2,315.56 3,010.48 2,489.40 3,595.72

Finance Costs 2,396.27 2,314.98 2,392.94 1,835.17 1,747.25

Other income 1,020.45 1,064.52 1,432.08 1,860.71 1,657.60

Exceptional items (23.24) (275.14) (23.40) (4.09)

PBT 866.91 881.72 1,325.03 2,234.58 6,954.15

Tax 690.95 381.23 245.41 741.83 2,107.24

PAT (before 175.96 500.49 1,079.62 1,488.87 4,846.91


Minority Interest
and share of
Associates)

Profit/ (loss) 1.31 (0.81) (0.75) (9.71) (74.58)


attributable to
Minority Interest

Share of profit /
(loss) of
Associates

Consolidated 174.65 501.30 1,080.37 1,498.58 4,921.49


Profit / (Loss) for
the year

Balance Sheet Figures

Sources of Funds / (Rs. Cr)


Liabilities

Particulars FY FY FY FY FY
2011 2012 2013 2014 2015

Share Capital 339.01 339.01 339.01 339.01 339.01

Share application money 234.13 1.24


pending allotment

Reserves & Surplus 12,206. 12,783. 13,019. 13,659. 13,585.


80 51 57 72 40

Net worth (shareholders 12,545. 13,122. 13,592. 13,999. 13,924.


funds) 81 52 71 97 41

Minority Interest 1.48 3.65 114.33

Long term borrowings 5,418.0 6,291.3 43,192. 26,143. 28,535.


5 7 23 43 92

Current liabilities 34,714. 42,700. 33,118. 45,298. 31,165.


81 36 80 43 74

Other long term liabilities 4,886.7 5,907.8 2,370.5 7,931.0 9,199.4


and provisions 8 2 8 0 4

Deferred Tax Liabilities 3,195.6 3,085.2 3,342.1 2,804.4


4 8 3 5

Total Liabilities 60,761. 71,107. 92,275. 96,718. 85,744.


09 35 80 61 29

Current
Date Intrinsic market
value price

June 1213.46 996.25


2016

Oct 2016 ---- 449.60


DPS
YEAR/COMPAN ONG
Y C HPCL BPCL IOC
2012 9.75 8.5 11 5
2013 9.5 8.5 11 6.2
2014 9.5 15.5 17 8.7
2015 9.5 24.5 22.5 6.6
2016 8.5 34.5 31 14
mean 9.35 18.30 18.50 8.10
skewness -1.94 0.77 0.80 1.53
kurtosis 4.17 -0.91 -0.47 2.31
-
3.37 41.94 29.57 29.36
CAGR % % % %

EPS
YEAR/COMPANY ONGC HPCL BPCL IOC
2012 29.36 26.92 36.27 16.3
2013 24.46 26.72 36.55 20.61
2014 25.83 51.2 56.16 28.91
2015 20.73 80.72 70.32 21.72
2016 18.71 114.07 102.78 42.83
mean 23.82 59.93 60.42 26.07
skewness 0.09 0.75 0.97 1.31
kurtosis -1.09 -0.95 0.30 1.52
CAGR -10.5% 43.47% 29.74% 27.32%
ROE
YEAR/COMPA HPC
NY ONGC L BPCL IOC
2012 20.84 13.57 4.92 7.06
2013 15.88 1.34 11.21 7.06
2014 15.4 3.75 20.12 10.43
2015 10.16 7.72 21.3 7.08
2016 7.74 10.76 30.21 15.27
mean 14.00 7.43 17.55 9.38
skewness 0.08 -0.02 -0.08 1.50
kurtosis -0.98 -1.73 -0.69 1.60
- -
21.93 5.64 57.42 21.27
CAGR % % % %
DIVIDEND PAYOUT RATIO
YEAR/COMPANY ONGC HPCL BPCL IOC
2012 19.88 10.96 12.44 13.76
2013 20.65 9.96 17.4 14.74
2014 19.89 13.33 19.48 16.52
2015 20.46 17.6 21.4 16.34
2016 21.84 17.91 24.13 22.28
mean 20.54 13.95 18.97 16.73
skewness 1.30 0.17 -0.63 1.58
kurtosis 1.71 -2.86 0.46 2.89
CAGR 2.38% 13.06% 18.01% 12.80%

PRICE/BOOK VALUE
YEAR/COMPANY ONGC HPCL BPCL IOC PRICE-EARNINGS RATIO
2012 2.02 0.78 1.7 1.1 YEAR/COMPANY ONGC HPCL BPCL IOC
2013 2.14 0.7 1.64 1.12 2012 8.12 30.08 16.2 15.08
2014 1.99 0.7 1.71 1.03 2013 11 19.26 14.54 15.36
2015 1.28 1.38 2.61 1.32 2014 12.9 12.57 10.27 12.46
2016 1.21 1.45 2.4 1.29 2015 15.1 14.39 12.94 17.6
mean 1.73 1.00 2.01 1.17 2016 13 5.4 8.2 8.15
skewness -0.55 0.60 0.71 0.31 mean 12.02 16.34 12.43 13.73
kurtosis -3.13 -3.18 -2.62 -2.54 skewness -0.69 0.68 -0.28 -0.98
CAGR -12.03% 16.77% 9.00% 4.06% kurtosis 0.60 0.96 -1.45 0.86
- - -
CAGR 12.49% 34.91% 15.65% 14.26%
FUNDAMENTAL
ANALYSIS OF
OIL AND GAS INDUSTRY