Oil & gas shares under pressure; HPCL, IOC hit 52-week lows, GAIL falls 6%

The S&P BSE Oil & Gas index, the largest loser among sectoral indices, was down 1.6% as compared to 0.2% decline in the S&P BSE Sensex at 10:54 am

Shares of state-owned oil & gas companies including oil marketing companies (OMCs) were under pressure with the S&P BSE Oil & Gas index falling nearly 2% on the BSE.

GAIL India, Hindustan Petroleum Corporation (HPCL), Indraprastha Gas, Bharat Petroleum Corporation (BPCL), Oil India and Petronet LNG were down 2% to 5% on the BSE.

At 10:54 am; the S&P BSE Oil & Gas index, the largest loser among sectoral indices, was down 1.6% as compared to 0.2% decline in the S&P BSE Sensex.

GAIL India was down 6% to Rs 413 on the BSE in intra-day trade after the media report suggested that state-owned Oil and Natural Gas Corp (ONGC) may buy out gas utility in its Dahej mega petrochemical project in Gujarat to take full control of the recently commissioned plant. CLICK HERE TO READ FULL REPORT

Since March 15, in past eight trading sessions, GAIL India has fallen 10% after the Petroleum and Natural Gas Regulatory Board (PNGRB) has cancelled GAIL’s license to build Surat-Paradip natural gas pipeline owing to delays. The regulator has also ordered encashing the state-owned firm’s entire performance bank guarantee of Rs 200 million.

According to PTI report, state-owned Indian Oil Corp (IOC) and BPCL may buy 26% stake each in GAIL India, paying the government over Rs 200 billion each to become integrated energy firms.

The government of India, which holds 53.6% ownership in GAIL, has been looking to divest it, along the same lines as the divestiture of its 51.1% stake in HPCL to ONGC. At an average of last 3-months' trading price, the said transaction is likely to fetch Rs 411 billion, with both IOCL and BPCL paying Rs 206 billion each, according to analyst at Antique Stock Broking.

The brokerage firm believe that, just like the ONGC-HPCL transaction, this transaction too is unlikely to be a merger and will not materially alter GAIL's financial & operational independence and unlikely to trigger an open offer for GAIL's minority shareholders.

As far as IOCL and BPCL are concerned, we see this transaction more as a financial investment than a business one, having meaningful operational synergies, it added.

Among the other individual stocks, HPCL was trading 4% lower at Rs 325, after hitting a 52-week low of Rs 323 on the BSE in intra-day trade today. IOC too hit fresh 52-week low of Rs 165, while BPCL down nearly 3% at Rs 403, trading close to its 52-week low of Rs 400 touched on June 27, 2017 in intra-day trade.