Discuss PSX Sector - Oil & Gas Marketing Companies

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Apr 11, 2017
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#61
Oil & Gas Marketing Companies: OGRA prescribes higher gas tariff; Mainly negative for Ferts and Cements


25 June 2018
Insight Securities (Private) Limited




  • OGRA has released the Estimated Revenue Requirement (ERR) for SUI companies (SNGP and SSGC) which has also highlighted the provisional category wise prescribed gas prices.
  • As per the ERR, average gas prices for consumers (domestic and industrial) are set to increase by 46% (SSGC network) and 38% (SNGP network).
  • Within ISL universe Fertilizer and Cement sectors are the most affected with negative profitability impact of 3-23% and 6-7%, respectively. The prices in ERR are currently provisional and may be adjusted on Government’s orders. However, as per Dawn, the current law allows the Government to shift the burden of higher prices from one consumer to another without affecting the overall revenue set by OGRA
 
Apr 11, 2017
709
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#62
Oil & Gas Marketing Companies: Gas Price Increase & Likely Implication


25 June 2018
Topline Securities (Private) Limited




  • Oil & Gas Regulatory Authority (OGRA) has issued Estimated Revenue Requirements (ERR) for Sui North (SNGP) and Sui South (SSGC) for FY19 notifying ~30% increase in prescribed gas prices for Fertilizer, General Industries, Independent Power Plants & Captive Power Plants. The regulator has also increased prescribed prices for domestic consumers by 300%.
  • We believe that OGRA has only notified higher prescribed gas prices however the final authority of consumer gas price increase lies with Federal Government who may or may not approve raise gas prices. Since Dec 2016, when the last time consumer gas prices were notified, there has been no change in gas prices. However, if these gas prices are increased, we present below the following sector wise impact:
  • Gas price hike will be Positive for both gas marketing companies, SSGC and SNGPL, due to improvement in cash flows.
 
Apr 11, 2017
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#63
Oil & Gas Marketing Companies: Consumer gas price increase – to quick to judge


25 June 2018
Foundation Securities (Pvt.) Limited




  • OGRA (Oil and Gas Regulatory Authority) has finalized FY19 estimated revenue requirement for SNGP and SSGC. We believe the stated increase in the consumer prices is merely indicative in nature and is not at all binding on the government. Furthermore, in ERR allowable UFG losses for the two gas utilities has been enhanced to 6.3% and change the return regime for them.
  • OGRA had determined FY19 provisional prescribed avg. price for SNGP at Rs629.33/mmbtu, whereas Rs589.09/mmbtu for SSGC.
  • Before jumping the gun, the said prices are merely indicative prices (% increase is much lower than stated in the news reports) and the actual price change may substantially vary from proposed increase. The recommended increase is not binding on the government.
  • Historical precedence suggests, the govt has shied away from passing on the gas impact on the economically sensitive groups particularly Domestic. Domestic contributes ~29% of SSGC consumer base whereas its is 54% for SNGP. Furthermore, the calculation excludes Fertilizer and power plants operating on dedicated fields.
 
Apr 11, 2017
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#64
Oil & Gas Marketing Companies: Increase in Gas Tariffs to Burden End Consumers


25 June 2018
Elixir Securities Pakistan (Private) Limited




  • OGRA has proposed to increase gas tariffs in line with revenue requirements of both Gas Distribution Companies (Discos).
  • It is moderately positive for Gas Discos (SNGP, SSGC) due to slight upward revision in UFG benchmarks, and relatively similar Return on Operational Assets. More importantly, we expect cash flows of Gas Discos to improve with reduction in consumer subsidies.
  • The surge in baseline tariffs for domestic consumer remains the highest jumping by ~3x which is likely a result in reduction in consumer subsidies and have a spillover impact on inflation (2% MoM and 1.5% YoY).
  • EFERT and FATIMA are expected to gain at the expense of other fertilizer manufacturers as they enjoy incentive pricing for feedstock. We expect FFC of increase urea prices by ~PKR65/bag to pass on the impact of higher gas prices
 
Apr 11, 2017
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#65
Oil & Gas Marketing Companies: OMC Margins ‘Reportedly’ Set at PkR2.64/litre on HSD and MS Sales


28 June 2018
Shajar Capital Pakistan (Private) Limited




  • According to news sources, the government has notified the Oil and Gas Regulatory Authority (OGRA) that the Oil Marketing Companies (OMCs) margins would be increased on the sale of HSD and MS, effective July 1, 2018, reportedly.
  • OMCs will now collect PkR2.64/litre on MS and HSD, compared to the earlier PkR2.41/litre charged on HSD and PkR2.55/litre on MS. (HSD Margin á9.5%; MS Margin á3.5%). As per our understanding, this is a continuation of the deregulation of HSD that the government is currently mulling over.
  • In addition to the OMC margins, the ECC took the decision to increase Dealer Margins as well from PkR2.67/litre on HSD to PkR2.93/litre, while the margin on MS was increased from PkR3.35/litre to PkR3.47/litre.
  • We estimate the increase in OMC margins to add PkR2.3/sh to HASCOL’s after-tax income on an annualized basis, while those for PSO are expected to increase by PkR3.1/sh after-tax for FY19E.
 
Apr 11, 2017
709
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#66
Oil & Gas Marketing Companies: MC and dealer margins increased for MS and HSD in line with CPI inflation; rise in FO price and volume a further respite


28 June 2018
IGI Finex Securities Limited




  • We have revised upwards our earnings estimates for Hascol Petroleum Limited (HASCOL), Attock Petroleum Limited (APL) and Pakistan State Oil (PSO) based on a) increase in Motor Spirit (MS) and High Speed Diesel (HSD) margins post notification by Petroleum Division (mainly HSD as margin increase was delayed throughout FY18 due to deregulation of margins), b) higher price of Furnace Oil (FO) and, c) improved volumes of FO during 4QFY18.
  • The OMC margins have been augmented by PKR 0.09/ltr and PKR 0.23/ltr to PKR 2.64/ltr each for MS and HSD respectively.
  • Based on the hike in OMC margins, we expect incremental earnings impact of +15%, +6% and +5% for HASCOL, APL and PSO respectively for CY18/FY19.
  • The GoP imposed super tax of 3% in FY18 with a gradual reduction of 1% annually while simultaneously providing a gradual relief of 1% annual reduction in corporate tax rate to stand at 25% by FY23 from 30% in FY18.
 
Apr 11, 2017
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#67
Oil & Gas Marketing Companies: Jun-18: OMC's Sales volume plunged by 18%YoY


03 July 2018
Spectrum Securities (Private) Limited




  • In Jun-18, OMC's Sales volume dropped by 27% MoM to 1.4mn tons mainly due to a decline in HSD sales by 38% MoM, while OMC's Sales fell by 18% YoY because of falling FO sales by 28% YoY. While for the entire fiscal year, the sales merely fell by 8% YoY in FY18 to 18.2mn tons from 19.7mn tons in FY17, mainly due to a sharp decline in FO sales.
  • On monthly bases, sales for HASCOL, PSO, Shell, & APL plunged by 34%, 28%, 18% and 16% MoM respectively, Jun-18, as all the POL products fell considerably compared to last month (May-18). This was mainly due to a huge hike in white oil prices, which was led by an increase in WTI Crude price coupled with the devaluation of PKR against USD.
  • Similarly, Shell, PSO, APL & HASCOL sales declined by 28%, 20%, 9%, 5% YoY compared to Jun-17, although except for PSO's MS, all other POL products fell SPLY.
 
Apr 11, 2017
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#68
Oil & Gas Marketing Companies: Increasing oil prices weigh down on demand – fuel sales down 22% MoM


03 July 2018
JS Global Capital Limited




  • As indicated by Oil Companies Advisory Committee (OCAC) data, fuel sales during Jun-2018 declined by 9%/22% YoY/MoM to clock-in at 1,903k tons.
  • Motor Spirit (MS) sales showed improvement on a YoY basis of 9%. However, on a sequential basis, MS sales declined by 4% MoM to clock-in at 614k tons.
  • High Speed Diesel (HSD) and Furnace Oil (FO) sales also plummeted by 9%/34% YoY/MoM and 24%/25% YoY/MoM to stand at 589k tons and 645k tons respectively.
 
Apr 11, 2017
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#69
Oil & Gas Marketing Companies: Jun’18: A Tough Month for OMC Sales (22.2%MoM) Driven by Holidays


03 July 2018
Shajar Capital Pakistan (Private) Limited




  • OMCs in Pakistan sold 1.9mn MT of Petroleum Products during Jun’18 (â22.3%MoM, â10.4% YoY) vs. 2.45mn MT in May’18 and 2.12mn MT in Jun’17, which we believe was driven by Ramadan and Eid during the month. APL’s sales showed a lower decline compared to the industry, while those for PSO, HASCOL, and SHEL fell by more. APL’s volumes showed a downtick of 16.7%MoM, while PSO, SHEL, and HASCOL’s volumes were down by 26.9%MoM, 20.2%MoM, and 34.1%MoM, respectively.
  • OMC sales during FY18 declined by 4.2%YoY (FY18: 24.43mn MT vs. FY17: 25.5mn MT), dragged down by a 24%YoY decline in FO sales (FY18 FO sales: 7.1mn MT vs. FY17 FO sales: 9.4mn MT) as the government took steps to reduce the use of the Black Oil for electricity generation. MS and HSD sales were up by 9.9%YoY and 6%YoY, respectively. On a YoY basis, HASCOL and APL were able to increase their sales volumes and outperform the industry, by 30.3%YoY and 3.3%YoY, respectively. PSO and SHEL on the other hand underperformed the industry, with a 12%YoY and 31.4%YoY decline in sales, respectively.
  • During FY18, HASCOL’s volumes were up by 30.3%YoY from 2.22mn tons in FY17 and 2.89mn tons in FY18. APL was able to increase its volumes over the period by 3.3%YoY (FY18: 2.15mn tons vs. FY17: 2.08mn tons). PSO sold a total of 12.4mn tons of POL products, 12% lower than the 14.1mn tons sold in the SPLY, driven by a 30% decline in FO sales during the period. SHEL’s sales volumes were down by 31.4%YoY (FY18: 1.61mn tons vs. FY17: 2.35mn tons).
 
Apr 11, 2017
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#70
Oil & Gas Marketing Companies: FY18E: POL sales grows by 8.1%YoY (excl. FO sales)


03 July 2018
Summit Capital (Private) Limited




  • As per the recently announced provisional figures, POL sales witnessed a meager decline of 4.2%YoY to 23.6mn tons in FY18. However, excluding furnace oil sales, MS and HSD sales volume are estimated to grow by 8.1%YoY on the back of sturdy automobile volume and stronger economic growth in FY18.
  • Company wise data shows PSO remained market leader in POL products by 49% followed by HASCOL/APL/SHEL of 12%/9%/6% respectively. However PSO’s share in FY18 is expected to decline by 5.3% amid cut in HSD market share on growing retail network by HASCOL and fall in FO sales.
  • In Jun’18, overall POL products sales depicted a slowdown by 19%YoY to 1.74mn tons mainly contributed by low HSD/FO off-takes during the month. Increase in POL prices and festive holidays may be contributing factors toward the decline in HSD sales volume. Apart from overall volumes, MS sales during the month remained on higher note by +15%YoY.
 

xResearch

Active member
Apr 9, 2017
1,926
1
38
#71
August 3, 2018
Summit Capital Research


Jul-18: Oil sales volume dropped by 29%YoY I MS volumes intact…
  • In Jul-18, POL products sales continued its downward trajectory to the tune of 1.6mn tons (-30%YoY) mainly attributable to lower furnace oil sales for the said period. Similarly HSD sales also plummeted by 19%YoY to 0.61mn tons whereas, MS sales remained intact at 0.61mn tons (-0.5%YoY) on continuous increase in automobile vehicles.
  • Company wise data shows, PSO lost its market share in retail segment as HASCOL and APL are giving stiff competition to state owned oil company. During the month, PSO overall sales hard-pressed by 50%YoY to 0.6mn tons as FO sales figures significantly went down by 77%YoY to 0.14mn tons. Similarly, APL/HASCOL/SHEL total sales deteriorated by 15/11/-0.4%YoY in Jul’18 respectively.
  • Conversely, to ease exposure to oil import and environmental issues, Govt. restricted electricity generation from FO which reflected in FY18 electricity generation figures. Furnace oil usage in electricity generation dropped to 21% in FY18 versus 32% during SPLY. Resultantly furnace oil sales continued its declining trend and reported at 0.35mn tons in Jul-18. Going forward, we expect FO demand for FY19 would likely in range of 3-4mn tons. We expect growth in retail fuel sales may slow down amid increase in oil prices and projected drop in car sales going forward. As upcoming Govt. in its way to bring improvement in regulatory structures, we expect that the oil marketing sector may get some relief from soaring circular debt (PKR566bn as per news reports).
ocac-july-2018.PNG
 

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