Oil Stocks Outlook: State-run marketing cos' shrs seen down next wk

[Sukumar]

Oil Stocks Outlook: State-run marketing cos' shrs seen dn next wk
Friday, Apr 4

NEW DELHI - Shares of state-run oil marketing companies are likely
tore main in the negative zone next week because of rising revenue
loss on sale of petroleum products at subsidised prices.

Three state-run oil marketingcompanies--Indian Oil Corp Ltd, Hindustan
Petroleum Corp Ltd and BharatPetroleum Corp Ltd--lost 773 bln rupees
for the financial year that ended onMar 31, against a previous
estimate of 720 bln rupees.

High crude oil price is continuing to be a major drag for
marketing
companies. It may have severe impact on their earnings for Jan-Mar.

A senior official of Indian Oil Corp said unless the government
takes a higher burden of 57.0% of the revenue loss, the company is
likely to report a net loss for the March quarter.

He said that even though the government has been saying it will
compensate 57.0% of revenue loss through the issue of bonds from
previous 42.7%, it has so far not officially intimated the oil
marketing companies about this.

In 2007-08, the government has issued bonds worth 203.56 bln
rupees to IOC, HPCL and BPCL.

Petroleum Minister Murli Deora Thursday said he has asked Prime
Minister Manmohan Singh to scrap import duty on crude oil to cushion
the impact of high global crude oil prices on marketing companies.

"We have got bonds but that is not enough to meet the losses of
the
marketing companies...they are bleeding," Deora said.

The Indian Oil official said that if global crude oil prices
continue to
hover around $100 per barrel, total revenue loss during 2008-09 (Apr-
Mar)could surpass 1.3 trln rupees.

"We hope crude oil prices would see some decline in another couple
ofmonths. That could provide some succour to the marketing companies,"
said

The performance of state-run oil marketing companies will continue
to depend on the support they receive from the government.

We are hoping that the government would take a decision in favour
of oil marketing companies, on rising crude oil prices and petroleum
products prices, in order to reduce the burden of their under-
recoveries at the earliest.

We said that heavy weight shares like Oil and Natural Gas Corp Ltd and
Reliance Industries Ltd are also likely to trade in the negative
territory next week due to weakness in the broad market.

Below are Friday's closing share prices, in rupees, of leading oil
companies on National Stock Exchange, compared with a week ago:

Company Closing price Closing price %
Change
Apr 4 Mar 28

Oil and Natural Gas Corp 1,005.20 1,049.15 -4.2
Indian Oil Corp 454.60
463.60 -1.9
Bharat Petroleum Corp 405.40 436.15
-7.1
Hindustan Petroleum Corp 256.30 263.85 -2.9
Reliance Industries 2,321.15 2,352.45
-1.3
Cairn India 225.85
229.00 -1.4
.
Nifty 4647.00 4942.00
-6.0
Sensex 15343.12 16371.29 -6.3

N.Sukumar
Research Analyst
www.kences1.blogspot.com