Oil & Gas Q3 Results Preview - A Sharp Turnaround From Q2: ICICI Securities

ICICI Securities Report

We expect Q3 FY23 earnings for the 12 oil and gas companies under our coverage to show strong sequential improvement, with operating earnings likely up by a massive 82% QoQ to Rs 661 billion and net income up 4.1 times QoQ to Rs 312 billion.

Bulk of the improvement is likely to be driven by sharp turnaround by the oil marketing companies, which should see a sharp narrowing of marketing losses on retail fuels and steady gross refining margins in Q3.

We expect Reliance Industries Ltd. to see a strong recovery QoQ with stronger oil-to-chemical plus Jio plus retail supporting a 5% QoQ jump in consolidated Ebitda.

For upstream, net realisations (net of windfall tax) are expected to remain steady at $73.5-74.1/barrel of oil while gas utilities’ earnings will likely continue to be impacted by weak demand and lower trading margins (for GAIL India Ltd.).

City gas distributions are expected to see the impact of higher gas costs on earnings, but aggressive pass-through of the same implies the damage to operating earnings would be relatively mild.

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