LIQUIDITY AND PROFITABILITY OF OIL AND GAS INDUSTRY

This Project Report is on Liquidity and Profitability of Oil and Gas Industry with all information about Private Oil and Gas Industries in India, Hindustan Petroleum Corporation Ltd. {HPCL}, Oil and Natural Gas Corporation Ltd. {ONGC}, Indian oil Corporation and RIL Reliance Industries Limited Contents Significance of the Study Conceptualization Industry profile Company profile Introduction of the topic Focus of the Problem Objectives of the study Suggestions

Significance of the Study It will help to scholars to get a summary of span knowledge of these companies. Helpful for top management to understand the trends of competitors. Helpful for further study of profitability and liquidity of different companies. Helpful for comparative analysis of various companies.

Conceptualization Oil and Gas Industry Overview : Oil and Gas Industry in India is a 130 billion USD industry (as in March '2008). The India oil & gas demand ranks it sixth in the world. Nearly 70% of the petroleum oil requirements of India are met by the imports. This is a matter of concern for the Indian Government as it might lead to oil crisis in India. To tackle this, large-scale oil and gas exploration and drilling is being undertaken

Industry profile Public Sector Undertakings (PSU's): ONGC - Oil & Natural Gas Corp (exploration and production) OIL - Oil India Limited (exploration & production) IOC - Indian Oil Corporation (refining & marketing) BPCL - Bharat Petroleum Corporation Ltd (refining and marketing) HPCL - Hindustan Petroleum (refining & marketing)

GSPC - Gujarat State Petroleum Corp

Private Oil & Gas companies in India RIL - Reliance Industries Limited (Indian Oil & gas company) ESSAR (Indian Oil & Gas company) Cairns Energy India BG energy Niko (upstream exploration & production) Shell Oil BP Total (downstream exploration & production, chemicals)

Company profile Indian oil Corporation : Indian Oil Corporation Ltd. (Indian Oil) is India's largest commercial enterprise, with a sales turnover of Rs. 2,47,479 crore (US $ 61.70 billion) and profits of Rs. 6,963 crore (US $ 1.74 billion) for the year 2007-08. Indian Oil is also the highest ranked Indian company in the prestigious Fortune 'Global 500' listing, having moved up 19 places to the 116th position in 2008. It is also the 18th largest petroleum company in the world. Oil & Natural Gas Corporation Ltd. {ONGC} : ONGC is engaged in exploration and production activities Until recently (March 2007) it was the largest company in terms of market cap in India. It (incorporated on June 23, 1993) is an Indian public sector petroleum company. Indian government holds 74.14% equity stake in this company. It contributes 77% of India's crude oil production and 81% of India's natural gas production. It is the highest profit making corporation in India. Financials : ONGC posted a net profit of Rs. 167.016 billion, the Highest by any Indian Company Net worth Rs. 699 billion Contributed over Rs. 300 billion to the exchequer

Hindustan Petroleum Corporation Ltd. {HPCL} : HPCL is an Indian energy company engaged in the refining of crude oil; marketing of oil products; and oil and gas exploration and production. It is a huge Public Sector Undertaking (PSU) with a Navratna status in India. It accounts for about 16% of the market share and 10.3% of Indias refining capacity. HPCL operates two major refineries in India, one in Mumbai with 5.5 Million Metric Tons Per Annum (MMTPA) capacity and the other in Vishakhapatnam with a capacity of 7.5 MMTPA. These refineries produce a wide variety of petroleum fuels and specialties.

Introduction of the topic - Liquidity and Profitability :

The capacity to be converted easily and with minimum loss into cash. Ultra-short-dated treasury notes are an example of a liquid investment. A liquid market is one in which there is enough activity to satisfy both buyers and sellers. High liquidity produces flexibility for a firm or an investor in a low-risk position, but it also tends to decrease profitability. Liquidity: we can calculate by this method Current ratio Quick ratio Operating cash flow ratio

Liquidity Ratio : Current ratio = current assets/current liability Acid-test ratio (Quick ratio) = current asset-(inventories + prepayment) / Current liability Operation cash flow ratio = Operation cash flow/current liability

Profitability : The ability of a company to earn a profit. It is a relative measure of success for a business profit, in economics, return on capital, also called earnings, minus the costs of maintaining land, labor, and capital. It is also known as net income. The main objective of every business concern is to earn profits. A business must be able to earn adequate profit in relation to the risk and capital invested in it.

Profitability Ratios or Income Ratios : Gross profit ratio:- Gross profit / Net Sales * 100 (Net sales= Sales Sales return) Net profit Ratio: - Net profit / Net sales * 100 (Operating Net Profit= operating net profit/ Net Sales *100 or operating Net profit= gross profit operating expenses) Operating Ratio :- Cost of goods sold + Operating expenses / Net Sales * 100

(Cost of goods sold = Net Sales Gross profit, Operating expenses = office & administration expenses + Selling & distribution expenses + discount + bad debts + interest on short loans) Earning per share (E.P.S.) :- Net Profit dividend on preference share / No. of equity shares Dividend per share (D.P.S.) :- Dividend paid to equity share Holders / No. Of equity shares *100 Dividend Payout ratio(D.P.) :- D.P.S. / E.P.S. *100

Focus of the Problem To understand the Profitability trend in different companies To understand the availability of cash to pay debts. To know the creditability of the companies.

Objectives of the Project Report : To To To To study study study study the the the the profitability and liquidity of the company. Profit trend of oil company. efficiency of company regarding utilization of resources. credibility of the companies.

Suggestions : No window dressing should be included in the liquidity and profitability analysis. It should be more structured and comprehensive. This should provide opportunity to improve financial position and creditability. There should be different time period for the measurement of the performance Liquidity and profitability should be based on accurate data. The companies should adopt optimum capital decision to get good return on long term investment to increase their profits.