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Oil India Ltd
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Ladies and gentlemen, welcome to the Q2 FY '23 Results Conference Call of Oil India Limited, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sabri Hazarika from Emkay Global Financial Services. Thank you, and over to you.
Yes. Good morning, everyone. On behalf of Emkay Global, I welcome you all to the Q2 FY '23 post-earnings conference call of Oil India Limited.
We are pleased to have the senior management of Oil India, led by Mr. Harish Madhav, Director Finance; Mr. Pankaj Kumar Goswami, Director Operations; and Dr. Manas Kumar Sharma, Director, Exploration & Development. So at the onset, the management will brief you -- brief on the results, and this will be followed by the question-and-answer round.
So now I request the Oil India management to -- management for their opening remarks. Over to you, sir.
Good morning, dear friends. At the outset, I outset, I would like to thank Emkay Global Financial Services for organizing today's investor conference. I'm Sanjay Choudhuri, EV Finance and Accounts.
The company's financial results for Q1 -- for Q2 FY '23 were published yesterday, and I would briefly give indications about the performance of the company, both in physical and financial terms.
The consolidated turnover of Oil for Q2 FY '23 is INR 10,463 crores, which over INR 7,420 crores last year in the same quarter. The consolidated turnover for the period ended 30th December 2022 is INR 20,000 crores versus INR 13,696 crores for the period ended 30th September 2021.
The consolidated profit after tax for Q2 FY '23 is INR 2,661 crores vis-à-vis INR 1,856 crores for the second quarter last year. The consolidated profit before tax for the period ended 30th September 2022 is INR 6,995 crores vis-a-vis INR 3,534 crores for the period ended 30th September, 2021.
The profit after tax at the group level of the company for the current quarter FY '23 is INR 2,115 crores vis-a-vis INR 1,454 crores for Q2 FY '22. The consolidated profit after tax for the period ended 30th September 2022 is INR 5,346 crores vis-a-vis INR 2,668 crores for the period ended 30th September 2021.
Now coming to the standalone results and we begin with the -- on the production front. The crude oil production for Q2 FY '23 is 0.799 MMT, which is increased by 4% over the same period last year. The gas production has also increased by over 2% over the same period last year.
On the financial side, we are happy to share that the highest ever quarterly profit after tax in Q3 FY '23 on string from better pricing and higher crude oil and natural gas prices.
The average crude oil price realization for Q3 FY '23 has been USD 100.59 versus around $71 per barrel for the same period last year, which is an increase of around 40%. The crude oil price realization for half year ended 30th September 2022 is USD 106.53 per barrel vis-a-vis USD 69.28 per barrel for the half year ended 30th September 2021, which is an increase of about 54%.
The company has paid special additional excise duty, the windfall for tax at $24 per barrel for the second quarter of FY '23. The average natural gas price for the half year ended 30th September 2022 is USD 6.10 per MMBtu vis-a-vis $1.79 per MMBtu for the half year ended 30th September 2021, which has increased by $4.31 per MMBtu.
The natural gas production, like I already shared for the quarter is higher. And for the half year has increased by around 5%. The Board has declared an interim dividend of INR 4.5 per share having face value of INR 10 each.
Now coming to the performance of Numaligarh Refinery Limited, the profit after tax of NRL for Q2 FY '23 is INR 728 crores, which is against a profit of INR 957 crores in the same quarter last year. NRL's cost refining margin has even flat to USD around $13 per barrel. The EPS for Q2 for NRL has been INR 9.89 per share against INR 13 per share in the same quarter last year.
With this my opening remarks on the performance is over, and we are now open to the question-and-answer session.
[Operator Instructions] We have the first question from the line of Probal Sen from ICICI Securities.
Congratulations on a good set of numbers. I had a couple of questions. One was, is it possible to share what was the comparable Q1 GRM of NRL? I presume this $13 per barrel is net of any excise benefit, correct?
Yes, GRM numbers reported are net of excise duty balances.
So sir, can I get the Q1 number as well, if you may?
Q1 NRL was about $6, I think. One second.
Sure, sir.
Q1 NRL was...
Hello?
Yes, we can hear you.
Okay.
We'll give you the NRL number in the meantime, we can proceed with the other questions.
Sure, sir. The other point was if we can get some details on the other income, so how much was the dividend income because other income number has gone up quite sharply? So...
Details of other income.
Other income, basically, we have received dividends from Numaligarh at the Indian -- IOCL in the second quarter. So last year, Numaligarh has not declared any dividend in the first half, we have not received others. So that INR 500 crore incremental is mainly on the account of the dividends received from NRL in the second quarter.
Okay. Okay. And sir, in terms of production, you mentioned that natural gas production has gone up quite well in H1, any guidance we can get for what we are targeting for natural gas production for this year and next year on an overall basis for '23 and '24? And for oil also, if you can share.
Yes. In fact, you may be knowing Oil India is going for some enhancement in products on both in oil and gas. So we have taken in the Nissan Note for Nissan for class. So in this respect, as part of our plan, the oil production is also going up and natural gas production is also going up.
So end of the year, we are expecting a oil production of around 3.2 MMT and gas production is also around 3.6, 3.5 -- 3.5 to 3.6 MMT in the million standard cubic meters.
This is 3.5 BCM, billion cubic meter, right?
BCM, yes.
And this is for FY '23 sir or FY '24?
No, for this year, '23.
And any sense you can give for FY '24 as well? Any targets that you have?
As of now, the target is going up to 4 in gas. And in oil...
And what about oil, sir?
Oil 3.6.
3.6?
Yes.
Okay. I'll come back, sir. I have more questions, but I'll come back.
We have the next question from the line of Somaiah V from Spark Capital.
My first question is on the CapEx front. So what is the plan for FY '23, '24 in terms of our stand-alone CapEx? And also from NRL standpoint, in terms of the expansion project, what is being deployed so far? And what is the outlook for the next couple of years? And also the equity contribution, if any, I mean, in the next 1 or 2 years that you expect from our side into India?
See, our CapEx for next year, that is '23, '24 you are asking. It will be close to around INR 4,500 crores. So the firm plans are not -- we have been funder, but it will be directionally around INR 4,500 crores.
At NRL whatever as per the plan of the refinery project execution. Next year, there will be total expenditure of around INR 8,000 crores for the NRL, INR 8,000 crores plus INR 4,000 crores total group about INR 13,000 crores to INR 14,000 crores, capital expenditure will come Oil and NRL put together.
So this INR 8,000 crores, and can we get kind of a profile of CapEx in terms of years, next couple of years, how we are looking at NRL? And also in this INR 8,000 crores...
NRL project entire INR 29,000 crore project is to complete by end of '24, '25. So in the next 2 years, that is current year '23-'24, '24-'25 entire expenditure hopefully, we did invested CapEx for the NRL expansion projects. And as far as the Oil India is concerned, our CapEx remains around INR 4,000 crore to INR 5,000 crore year-on-year. That is the rational we can say.
Understood, sir. So of the 70-30, the funding, anything from our side as an equity infusion that needs to be done for this project? Or it...
Yes. Total INR 8,000 crores, 70-30, our equity contribution for 70% is INR 3,000 crores, which will be invested. Maybe current year is unlikely next 2 years, we may have to contribute towards that.
Understood, sir. helpful. The second question is on the debt front. So still NRL continues to be with minimal debt. Is that the right understanding? And also what is the quantum of debt at the upstream? And also if you can give an update on the upstream projects where we are?
Project's part, I will come later. Debt part, let me give you a -- first question was about the NRL debt. NRL has started drawing a total debt, we have paid up about INR 80,000 crores, they have started drawing already out of that funding arrangements, but not significant drawdown so far because the refining margins and the cash flows have been fairly good as of now.
So whatever investments are happening largely happening from the internal resources. But going forward, next year, our equity contribution, loan total will increase possibly in the next year, or maybe later part of this year also.
On Oil India's debt profile, I think a debt remains more or less same, except there is a change in the valuation, whatever is we are looking is only on account of the exchange rate valuation, which as -- the rupee has depreciated, so dollar loans revalued at a higher value. So that is the only. Other way in dollar terms, there is no change.
And the rupee loan that we had taken for NRL acquisition, almost 90%, 95% of the debt we have already repaid. So remaining also, we will try to liquidate by December. And the projects -- upstream projects I will request by Director of Exploration cover that.
So far infrastructure projects are concerned. So we have been doing some oil and gas installation construction work in our main producing area, that is in Assam area. So around total project value will be around INR 3,500 crores and it consists of 4, 5 projects. One mega project is going on that is around INR 600 crores that is for construction of 2 installations for -- in Nadua and East Khagorijan area.
And there are other projects, some water injection installations are going on. Then new production pipelines are going on. So all these projects, cumulative will be around INR 3,000-plus crores project.
Understood. Sir. One last question, if I may. So on the dividend front, so what is the kind of payout ratio that you would be looking for? And given especially 1H has been quite strong. Your EPS of around 30, and the interim dividend is only 4.5. So what should we kind of expect going forward?
On the back of higher prices that we have received, however there has been the windfall tax, which has come. And accordingly, the dividend has to moderate it to that extent. Now with the unreal prices in the next 6 months, it will be difficult to take an absolute call regarding the dividends. However, conservatively speaking, we have been a little conservative maybe, but then we are likely to make up from that in the third quarter, if the prices hold good.
See, for the full year, we have been paying around 40% on an average of the payout, except for 2021 payout was about 30% only. Otherwise, in general, we have been 40% or more. And as for the government guidelines, it is minimum 30% or 5% of the network. So all we can say at this point because it's still 6 months to go and everybody knows that how the prices behave, it's anybody's prediction.
So at least 30% as per the government guidelines, we will certainly do. And if the profitability looks good, so even 30% should be at par with the previous years in the absolute terms or maybe slightly better. And if the things are good, we can improve upon. But that final call will be taken only after the annual results.
Understood, sir. Very helpful.
Now that end [indiscernible] brief you on the exploration front. Hello?
Yes, sir.
Yes. So as you were even, we are doing on, say, 63,000 total equity deals and build up by around more than 8/4 increase in equity deals. So our activities on OALP funds has started, and we have already dealed with 3 locations in Rajasthan. And other locations -- or 2 locations in -- 1 location in Northeast.
So Mahanadi also we are planning to start by -- for last quarter of this year. So this is the exploration that this is continuing. We are -- contribution from the OALP will be added up in the slightly later date, but then we are doing in as per plan on extensive exploration plan.
We're also planning to drill locations in offshore areas. So the initial planning is in progress.
[Operator Instructions] We have the next question from the line of V. Sivasankaran from Antique Limited.
One is that in terms of NRL CapEx cost, is there any chance that the cost could actually go up? Or are there's any chance of it?
As of now, there is no indication of cost escalation.
Fair enough. On the overseas operations, if you can provide some update on the rate of productions and where this time, whichever assets that you know?
Even today almost entirely comes from the Russian assets, 2 Russian assets of Tass and Vankor. Those assets are performing. Last year, our total production was around 2.5 million tonnes of crude oil for these 2 assets and basically all inclusive, but we can say it is almost 99% of these 2 assets.
So the current run rate is largely matching that?
Yes. The current year performance is almost in line with the earlier year. The other project in still, there are some issues. So we are hopefully that -- we are hoping that this project -- execution of the project starts quickly. So there are...
Last time around, I think like -- people were talking about a 6-month kind of time frame. So does that mean like in 3 or 4 months, we are likely to see some kind of an action?
We are hoping for that yes, was up quick as quickly as project activity 3Q.
Sure. Last question is on our oil production. You guided for 3.6 million tonnes next year. This 2Q, it seems like you're broadly there in terms of run rate. So we are not expecting any kind of an improve from those levels over the next 5, 6 quarters?
Increase beyond 3.6?
Yes. 2Q itself, we had 0.79. So which means we kind of are broadly there in terms of the run rate. So should we expect some increase on that as well? Or like should we stick to that number?
As of now in this year, we are targeting 3.2. And next year, we are targeting 3.6. So that will be from the existing assets that we have, but if we get something from OALP, that is very unlikely that we'll be getting OALP in the next financial year immediately. So we are not expecting anything for OALP as of now. But if we get from OALP, then there may be some possibility of increase in production.
[Operator Instructions] We have the next question from the line of Vishnu Kumar from Spark Capital.
On the NRL CapEx, again, you mentioned INR 29,000 crores, INR 30,000 crores total. How much have we spent till date, sir?
Till date, I think total commitments have been around INR 6,000, INR 7,000 crores -- about INR 8,000 crores.
INR 8,000 crores. Commitment as cash flows have gone out or?
No, not cash flow. Last year actual was INR 3,100 crores, sorry, for -- okay, INR 6,500 crores is the actual CapEx as of now.
Understood. Sir, so basically, another INR 25,000-odd crores over next 3 years.
[indiscernible] spent another 70%, 75%.
Understood, sir. Sir, the current run rate of NRL, I know, GRMs are a bit volatile, but you -- how much cash flows do you think that the asset can on its own generate to pay off on CapEx?
See, second quarter, NRL has made it GRM of about $13. And after we take -- I think I'm not very sure of the cost structure of NRL. But if we take out the cost that is $67 cash net margins, certainly the refinery must be making.
So cash flows of the refineries are good. And basically, a sense can be taken from this because out of the total loan of INR 18,000 only small volume has some -- INR 1,600 crores so far as is drawn.
So there is a likelihood that we may not draw the whole loan or draw the loan only towards the end of the project. So currently, the refinery is able to fund the project activities out of -- mostly out of the internal. And in terms of cash flow of the refining are good.
Got it. And you will -- for the incremental capacity also, you will get the excise duty benefit, right? Just to confirm.
Yes, yes.
We have the next question from the line of Probal Sen from ICICI Securities.
Thank you very much for giving me another opportunity. Sir, if I can come back to my question, was it possible to get that last quarter's numbers by any chance for NRL to get a comparison for Q1 FY '23.
Yes, NRL last quarter, GRM was -- Q1 was $32, and Q2 is about $14.
Okay. So it has fallen so sharply primarily because of inventory impact? Is it correct or generally because benchmarks are falling so much?
It's a mind play of so many things. One is that about the overall diesel margins have fallen, plus 1 July, the windfall tax of export duties, which have been levied on diesel EPS petrol.
Right, right, right. Okay. And sir, one more thing was what is the LPG output. I don't seem to have seen it in the detail. Forgive me if I missed it, the LPG outlook for this quarter?
It is about 15,000 tonnes. LPG production patterns remains more or less same it's about 30,000, 32,000 tonnes annually we produce. So quarter-on-quarter volumes remain around 7,000, 7,500 except that in some quarters, there is a shutdown of the plant, or something happens, the volumes get tested. But on an annualized basis is around 30,000, 32,000 tonnes LPG production is there.
Got it. Another was, you mentioned about the Area 1 project, which has obviously seen delays and -- can we get a little bit more color in terms of what you're hearing from the operator? Is the conflict now a bit under control? Has the force majeure's been lifted? And where are we in terms of -- and what kind of capital commitments can actually be seen assuming that the project restarts, let's say, in FY '24?
There have been efforts from the operator as well as the [ GTG ] efforts are being made on this score. And there has been some improvements at the ground level. There's some big at the ground level, yes. But then some sporadic events have also occurred. So we cannot say for sure that everything has come to a standstill per se, that everything is sorted out totally. So that is why that I Empanel -- I'd already mentioned that maybe on the 3, 4, 5 months' time, we hope that the things would really settle down and we can go, and the force majeure should be withdrawn.
So that's what I -- so assuming that, that happens, and in FY '24, what kind of investment commitment will be required from us to get the first 2 trains off the ground?
See, the moment -- is it Probal Sen?
Yes, sir. Yes, sir.
See, the moment the project activities kick off, the funding of the project will start out of the borrowings that have been raised. So the moment it starts immediately the funds from borrowings will start flowing in. And at that point of time, our equity contribution or our investment in that project will come down, or will remain at what level we are doing as of now.
Got it. So it will mostly be in terms of the financing that has already been arranged. Sir, is what you're saying?
Currently, we are funding because the bank finances or the loan finances are not available because the project is not moving. I'm not saying bank finances will be available, and our resources will either continue at the same level or may come down.
And the operator and the assessment of the available reserves and the potential remains as before, right, sir? There has been no change on that front.
Yes, yes.
Okay. Thank you for such a detailed answer, sir.
We have the next question of the line of Somaiah V from Spark Capital.
So with respect to these realizations on oil and the royalty and Cess. So the royalty and Cess that we pay, is it net of the special additional duty? Or is it as a gross term?
The royalty that we paid is in the gross amount. However, the Cess we pay is net off the SCD.
Understood, sir. Sir, second question, I mean post NRL expansion, would there be a change in the product mix, where we are today post expansion?
Unlikely though because HSD has been the main product produced because Middle East still is having the 80% of the production. So -- and it's unlikely that in the foreseeable future, that there will be change, however depending on the market conditions because large quantities are going to be exported, that might change depending on the market conditions.
Okay, sir. Sir, On the international assets, any equity contribution that is required from our side over the next couple of years? Or any CapEx outlook that you see at the international -- I mean, at the asset level for the next 2, 3 years?
Equity contribution, if at all it happens, it will happen only in case of Mozambique, it is happening a little bit as of now also. And if we continue in Mozambique, total about $500 million equity we have to contribute. So the remaining equity $400 million $450 million maybe a rough. That will go over the project life.
As I just explained in the previous question, that once the loan funds start flowing in, our contribution -- this slowdown in Mozambique. Other than Mozambique as of now, there is no equity contribution, or any investment lined up in any of the overseas projects.
[Operator Instructions] We have the next question from the line of Krishnan Mundhra from Antique Research.
Just [indiscernible] question from my end, sir, for the debt that you have taken for the Numaligarh expansion, in the book of the Numaligarh...
Sorry to interrupt Mr. Krishnan. Your audio is breaking in. If you could kindly go of the speakerphone and continue.
So I'm not on the speaker, but just let me try again. Is it better?
This is better, yes.
With regard to the debt that you've written in the books Numaligarh for the expansion program, is it possible for you to let us know the terms of the loan? And I presume it's a dollar-denominated loan, but what is the interest rate if it is possible?
I don't think that will be possible for us. It is not a dollar-denominated loan. It's all rupee loan, other in the Indian time. And I think the terms of the loan, that would be a little bit confidential. Banks also may not like us to share that information with the public.
Okay. But definitely a flexy loan term [indiscernible] I mean, the interest rate payout for the loan for the [indiscernible]?
I'm sorry, again, [ Krishnan ] your voice is breaking up again.
Your question correctly.
Krishnan, your audio is breaking up again, please speak slowly and louder.
Perhaps, I'll come back in the line again.
Sure. We have the next question from the line of Vikash Jain from CLSA.
I have a couple of them. Firstly, on seismic, can you give me what is the seismic cost, sir for this particular quarter?
Seismic cost?
The seismic cost as of this year up to now has been around INR 350 crores odd.
Sorry, how much?
INR 350 crores odd.
And for this particular quarter?
This particular quarter would be -- this particular quarter, about 60% of that -- INR 100 crores for this quarter.
INR 100 crores for this quarter and first half is INR 350 crores.
INR 325 crores.
INR 325 crores. Okay. And any other reason why OpEx has jumped up? What is the element of ForEx in here? Or is there any other big one-off or any provisions which are there?
Because of -- majorly because of the exchange rate there's been an exchange duty -- SED and exchange rate, the 2 major elements.
And what is the second one? One is exchange rate. Can you tell -- can you share that...
And second is special excess duty we're giving for tax.
But that will not come under OpEx, would it?
It would, yes, it is the cost to us.
Okay. Fine. So anyways, x of that also, if I adjust for that also, then it seems to have gone up. And that's what I wanted to check.
To some extent, contract costs have gone up because we have had the [indiscernible] leverage have gone out -- gone up. The guided labor rates have gone up, which has accounted for about INR 60 crores, INR 70-odd crores to that extent. And we had additional expenditure on OALP because we are on an aggressive seismic survey program.
Over and above that, there have been production enhancement contracts also, which have also costed around INR 30 crores odd. So all this put together, you will see there has been an additional OpEx of around INR 100 crores, INR 110 crores, extra. And the strip it is on SED and foreign exchange.
Yes. Foreign exchange, what is the amount, like I think from the last call you have mentioned...
Foreign exchange that is about INR 500 crores.
Okay. And last quarter, it was INR 200 crores, right? So INR 500 crores for the quarter or for the first half, sir?
INR 500 crores is for the quarter. One second. We are taking out the number because [indiscernible] we can [indiscernible] next numbers.
Sure. And sir, depletion has kind of varied a lot over the last few quarters. Are we kind of...
The depreciation?
Depletion, depletion.
Depletion. Yes. So depletion, it hasn't varied over the last few quarters, it has varied over last year. In fact, depletion numbers have come down this year over the last year because the PR rates has become -- has been lower this year than last year.
Okay. So now roughly unless we see a big revision in results or something which happens only typically towards the end of the year. Is it fair to say that this kind of a number is what we look at about INR 300 crores a quarter or so?
Yes. Yes, this is more or less going to be flat for the rest of the year.
Okay. Yes. So I think then does that clarification on ForEx would be useful?
Yes, the quarter.
For the second quarter, ForEx loss is INR 290 crores.
Okay. And first half, is the remaining INR 210 crores or something. Okay.
We have the next question from the line of Siddharth Chauhan from B&K Securities. Mr. Chauhan, can you hear us?
We'll move on to the next question. I now invite Hardik from ICICI Securities.
Is it possible for you to share what part of a diesel production will be exported in terms of -- in NRL in terms of percentage, that would be fine?
We will have that detail because everything as you from [indiscernible] because the contract has not been [indiscernible] firmed as, so it is tough to.
You are intending for the current volume of exports or?
Yes, current quarter, current quarter volume.
Current quarter?
Yes, for current?
How much diesel is getting exported from NRL, this is what you're looking for?
Right, right, right.
I would suggest you send us an e-mail; we will respond to that separately.
Sure, sir.
That was the last question. I would now like to hand it over to the management for closing comments.
Thank you, all the analysts and the investors who participated in the call. And I think we have been able to provide whatever information except the last one about the diesel export that we will separately provide to the person who had asked for.
And thank you very much, all of you once again, and company's performance, all I will say, has been very good in the beginning of the current financial year and the last year also. And its production of course, physical numbers are going to improve from now onwards further.
And financially, the pricing support also apparently, if it remains, the company will be in a very, very good financial position and balance sheet of the company is also very strong. The borrowings are limited only for the specific project-wise borrowing. And for the regular CapEx, everything continues to be invested out of internal resources, we will continue to do.
NRL is doing very well, the refinery configuration of the existing refinery entitled or enables it to make very good GRMs. And the excise duty benefit, of course, it is available. So the project is on schedule. Our target production of 4.2 and 5 BCM of gas by '24, '25. We are also progressing on that almost as per the schedule what we have targeted.
So the future of the company looks good. We will keep on interacting in future also every quarterly. And -- otherwise also, as and when anybody wishes to interact with us, we will do that. We'll be happy to do that.
And thank you for -- Mr. Sabri Hazarika for arranging this call. Thank you so much. And from our entire management, our Director, Operation Director, Exploration, ED Finance. We are once again thankful to everyone for participating. Thank you.
Thank you. Thank you so much.
On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.