Essar Oil in demand after improved Q1 results

Essar Oil jumped 4.96% to Rs 60.35 on BSE after the company reported a net loss of Rs 863 crore in Q1 June 2013, lower than net loss of Rs 1518 crore in Q1 June 2012.

The result was announced during trading hours today, 14 August 2013.

Meanwhile, the BSE Sensex was up 137.75 points, or 0.72%, to 19,367.59.

On BSE, 5.36 lakh shares were traded in the counter compared with average volume of 3.51 lakh shares in the past one quarter.

The stock hit a high of Rs 60.35 and a low of Rs 57.20 so far during the day. The stock hit a 52-week high of Rs 96.15 on 4 February 2013. It hit a 52-week low of Rs 46 on 31 August 2012.

The stock had underperformed the market over the past one month till 13 August 2013, sliding 13.27% compared with the Sensex's 3.65% decline. The scrip had also underperformed the market in past one quarter, falling 29.36% as against Sensex's 2.35% fall.

The mid-cap company has an equity capital of Rs 1427.59 crore. Face value per share is Rs 10.

Essar Oil reported a 12% increase in revenue to Rs 24721 crore in Q1 June 2013 over Q1 June 2012, on the back of 15% improvement of throughput, which stood at 5.14 million metric tonnes (MMT) in Q1 June 2013, against 4.48 MMT in Q1 June 2012.

Earnings before interest taxes depreciation and amortization (EBITDA) was reported at Rs 1106 crore in Q1 June 2013 compared with a negative EBITDA of Rs 178 crore in Q1 June 2012. The current price Gross Refining Margin (GRM) jumped 49% to $7.01 per bbl in Q1 June 2013 over Q1 June 2012, reflecting the higher complexity benefits post completion of expansion and optimization projects.

The company reported a net loss of Rs 863 crore during the quarter, mainly due to negative forex fluctuations arising out of 10% rupee depreciation during the quarter. Essar Oil follows a very prudent risk management policy to hedge all its risks against currency fluctuations. As a result, the forex variations are mostly of mark-to-market nature, which is recoverable through sales or GRM in next quarters and hence have cash and earning neutral impact during the full financial year, the company said.

The company's refinery processed 5.14 MMT of crude, up 15% in Q1 June 2013 over Q1 June 2012. The refinery continues to function at over its nameplate capacity of 20 million metric tonnes per annum (MMTPA) for the last four consecutive quarters with all units stabilized. During the quarter, the refinery operated at 103% of its capacity, the company said.

Share of ultra heavy crude in refinery's crude diet rose to 56% in the reporting quarter from 48% in the same period last year. Overall, the refinery processed 92% of heavy and ultra heavy crude in Q1 June 2013, Essar Oil said.

Production of valuable middle and light distillates share in the overall crude slate improved to 84% in Q1 June 2013, from 82% in Q1 June 2012 with the capability to produce Euro IV and V grade products.

Talking on the results, Mr L K Gupta, Managing Director and CEO, Essar Oil,said, The refinery has demonstrated excellent operating performance with a very strong focus on safety and has consistently outperformed the targeted benchmark IEA margins. Going forward, we are looking to further strengthen our retail business as the deregulation of diesel is eventually in sight based on regular increase in the retail prices.

Mr Suresh Jain, CFO, Essar Oil, said, The quarter was marked by rupee volatility, which has impacted our profitability due to mark-to-market provisions. Due to prudent risk management policy followed by us, there are no cash losses. We continue on our path to dollarize our debt and have converted rupee term loans into equivalent foreign currency debt of $340 million through ECBs / swaps, taking our total dollarized debt to $821 million, in line with RBI approval. Besides providing interest saving, this also enhances our liquidity position.

Essar Oil is a fully integrated oil and gas company of international scale with strong presence across the hydrocarbon value chain from exploration and production to refining and oil retail. Essar Oil owns India's second largest single site refinery having a capacity of 20 MMTPA and complexity of 11.8, which is amongst the highest globally. It has a portfolio of onshore and offshore oil and gas blocks with about 1.7 billion barrels of oil equivalent in reserves and resources. There are more than 1,600 Essar-branded oil retail outlets in various parts of India.

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