Despite the number of encouraging developments happening for the Indian petroleum sector, the results/numbers for the first quarter of FY 2011 will be somewhat subdued. The main reason behind the subdued performance of the country's petroleum sector is the high levels of under recoveries. However as per industry experts, this fiscal year, the petroleum sector will offer a number of investment opportunities to the investors.
According to industry experts, the profits of the Indian oil companies will be under tremendous pressure of the Q1 FY 2011. According to industry insiders, of the total under recoveries of around INR 18,000 crore for the quarter ending June 2010, ONGC's accounted for around INR 5,100 crore. This value is more than ten times the value ONGC had same period last year (INR 429 crore). The company's YOY profits are all set to decline on the back of stagnating production and declining oil prices.
As per industry estimates, the profits of ONGC for the Q1 FY 2011 will decline by around 28-30% YOY. Two main reasons behing this decline is the subsidy burden and second is the negative impact of the hundred day shutdown of Numaligarh refinery. This refinery is ONGC's main customer. Because of the shutdown the production had to be reduced, which resulted in production lo9ss of around million barrels.
However, as per experts, cairn profit is expected to reach INR 400 crore. According to Alok Deshpande of Elara Securities, "Having its Rajasthan output ramped up to 60,000 bpd, we expect Cairn to report a strong quarter with an average production at 45-50 kbpd in June 2010 quarter, up from 17.5 kbpd in March '10 quarter."