Essar Oil posts loss on costs, Re depreciation

Higher cost on interest and depreciation led Essar Oil Ltd to post a net loss of Rs 1,400 crore for the April-June quarter. The company had posted a profit of Rs 469 crore during the corresponding previous quarter.

Essar Oil said losses were mainly attributable to inventory losses of Rs 700 crore as global oil prices crashed. Depreciation in rupee led to a loss of around Rs 150-200 crore, while the interest and depreciation jumped on projects commissioning.

“A significant drop in crude-oil prices, coupled with the rupee depreciation, has impacted the whole industry,” Suresh Jain, chief financial officer of the company, said in a press statement. “In addition, due to a ramp-up in capacity, we had higher interest and depreciation cost post-capitalisation, which will be offset in the coming quarters with improved margins.”

 

A higher product price realisation on account of increased domestic sales and rupee depreciation, however, facilitated the company to post highest ever quarterly revenue at Rs 22,109 crore, up 34 per cent against Rs 16,478 crore in first quarter of the last financial year.

During the quarter, Essar Oil also completed its optimisation project, which resulted in enhancement of the Vadinar Refinery capacity from 18 million tonnes per annum to (mtpa) to 20 mtpa.

"With upward movement of crude oil price and stabilisation of the rupee at Rs 56 levels against the US dollar, coupled with higher margins coming out of enhanced refinery complexity and stabilisation of ramped-up capacity, the results are expected to witness significant upward movement from next quarter," the company said in a press statement.

Gross refining margin (GRMs) for the April-June quarter stood at $5.12 a barrel against $2.5 a year ago. The company expects GRMs to be $7-8 a barrel higher than the benchmark International Energy Agency margins from the current quarter onwards.

"Benefits of higher capacity and complexity have already begun reflecting in our results. Going forward, we are confident of maintaining the momentum of improved GRMs, given the full benefit of our expansion will accrue from current quarter onwards,” said L K Gupta, managing director and chief executive officer, Essar Oil.

Last week the company received approval for exiting the corporate debt restructuring (CDR) loan facility from its lenders. The facility, set up in December 2004, was used for construction of its refinery in Gujarat. The CDR facility has been replaced with a new debt facility of about Rs 9,400 crore on mutually acceptable commercial terms from similar group of lenders.

The company said it would not expand its retail operations till there was clarity on pricing of diesel. Essar Oil has around 1,400 retail outlets with 200 outlets under various stages of construction.

CBM
Essar has received mining lease approval to drill additional wells for coal bed methane (CBM) project at Raniganj, West Bengal. As of now, the company has drilled 73 wells, producing 25,000 million standard cubic metres of gas per day from 15 to 20 wells. Nearly 10 rigs are already operating at site and 20 more rigs will be deployed to achieve fast-track development of CBM block. Environment clearance for phase three and pricing approval from the government for commercial sales is expected shortly, the company said.