Discuss PSX Sector - Oil & Gas Marketing Companies

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  • جو شخص بہانہ بنانے میں بہت اچھا ہو ، وہ کسی اور کام میں اچھا نہیں ہو سکتا
  • پیسہ بدترین آقا ہے، مگر بہترین غلام بھی ہے
  • کسی فرد یا قوم کو برباد کرنا ہے تو اس کی امید کو مار ڈالیے اور اگر اسے تعمیر کرنا ہے اس کی امید کا دیا روشن کیجئے
  • کامیابی سوچ سے ملتی ہے
  • زندگی کی دوڑ میں دوسروں سے آگے نکلنے کیلئے تیز چلنا ضروری نہیں، بلکہ ہر رکاوٹ کے باوجود چلتے رہنا اور مسلسل چلتے رہنا ضروری ہے
  • جب باتیں آمنے سامنے ہوتی ہیں تو جھوٹ اور غلط فہممی کا خاتمہ ہو جاتا ھے
  • بہت اونچے پہاڑ پر چڑھنے کے لئیے قدم آہستہ آہستہ اٹھانا پڑتے ہیں
  • تین چیزیں نیکی کی بنیاد ہیں، تواضع بے توقع, سخاوت بے منت اور خدمت بے طلبِ مکافات
  • غربت اور افلاس کی وجہ پیداوار کی کمی نہیں، بلکہ اسکی غلط تقسیم ہے
  • دولت ہونے سے آدمی اپنے آپ کو بھول جاتا ہے اور دولت نہ ہونے سے لوگ اس کو بھول جاتے ہیں
  • مصروف زندگی نماز کو مشکل بنا دیتی ہے , لیکن نماز مصروف زندگی کو بھی آسان بنا دیتی ہے
  • گناہ کو پھیلانے کا ذریعہ بھی مت بنو, کیونکہ ہوسکتا ہے آپ تو توبہ کرلو, لیکن جس کو آپ نے گناہ پر لگایا ہے وہ آپ کی آخرت کی تباہی کا سبب بن جائے
  • اپنی زندگی میں ہر کسی کو اہمیت دو, جو اچھا ہوگا وہ خوشی دے گا اور جو برا ہوگا وہ سبق دے گا
  • درخت جتنا اونچا ہو گا اس کا سایہ اتنا ہی چھوٹا ہو گا, اس لیے اونچا بننے کی بجائے بڑا بننے کی کوشش کرو
  • جو شخص کوشش اور عمل میں کوتاہی کرتا ہے, پیچھے رہنا اس کا مقدر ہے
  • جو لوگ میانہ روی اختیار کرتے ہیں, کسی کے محتاج نہیں ہوتے
  • حقیقی بڑا تو وہ ہے جو اپنے ہر چھوٹے کو پہچانتا ہوں اور اس کی ضروریات کا خیال رکھتا ہو

Apr 11, 2017
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#41
Pakistan Oil Marketing Companies: OMC sales stand at 20.1mn tons for 10MFY18, down 3.5%YoY


04 May 2018
First Capital Equities Limited




  • OMC sales for Apr’18 clocked in at 1.9mn tons, up 6%MoM though declining by 16%YoY as furnace oil sales continue to remain depressed in the wake of closure of furnace oil based power plants. Sales of retail products increased by a meagre 3.7%YoY however the MoM growth remains robust (up 8%YoY). Overall, the volumes for 10MFY18 stand at 20.1mn tons, down 3.5%YoY.
  • Despite FO being a major drag, HSD and MS provide strong support as automobile sales continue to flourish (up 22%YoY for 9MFY18) and construction remains robust (local cement dispatches up 18%YoY for 9MFY18). Company wise, HASCOL outshined its counterparts with the highest ever monthly volumes at 0.28mn tons for Apr’18 as the company continues with its aggressive strategy to expand its footprint across the country. On the other hand, APL and SHEL continue to lose their share to HASCOL.
  • Moving forward, a slowdown in growth is expected as we approach Ramzan and Monsoon where business/construction activity will slow down. Buildup of circular debt continues however, as per new reports, government is considering to release a payment to the tune of 100bn which can provide respite to PSO. We remain Market Weight on the sector with PSO (TP: PkR392/sh) as our top pick.
 
Apr 11, 2017
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#42
Oil & Gas Marketing Companies: Apr’18 OMC Volumes ?16%YoY, ?4%MoM; PSO Gaining Back its Footing


07 May 2018
Shajar Capital Pakistan (Private) Limited




  • OMCs in Pakistan sold 1.86mn MT of Petroleum Products during Apr’18 (á4.3% MoM, â16% YoY) vs. 1.79mn MT in Mar’18 and 2.22mn MT in Apr’17. PSO was able to regain its standing during the month, with volumes increasing by 10.1%MoM for the OMC, majorly due to improvement in FO and HSD sales.
  • Industry HSD volumes were up by 5.5% MoM to 770,073 MT, while FO volumes showed a meagre increase of 0.7%MoM to 369,946 MT; volumes of MS increased by 8.8%MoM from 598,475 MT in March to 651,341 MT in April.
  • OMC sales in the first 10 months of the fiscal year declined by 4%YoY, dragged down by a 26%YoY decline in FO sales as the government took steps to reduce the use of the Black Oil for electricity generation. MS and HSD sales were up by 11% and 8%, respectively.
  • PSO’s sales for 10MFY18 showed a dip of 12%YoY, HASCOL’s volumes were up by a staggering 36%YoY, while those for SHEL were down by 32%YoY. APL was able to increase its volumes over the period by 6%YoY.
 
Apr 11, 2017
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#43
Oil & Gas Marketing Companies: OMC sales volume falters up by 20%YoY


07 May 2018
Spectrum Securities (Private) Limited




  • In Apr-18 total sales volume of OMCs (HSD, MS, and FO) dropped by 20%YoY compared to Apr-17. FO and HSD sales volumes were declined by 51%YoY and 10%YoY respectively in Apr-18, however, MS volumes increased by 12%YoY.
  • MS, FO, and HSD sales volumes grew by 13%MoM, 15%MoM and 11%MoM for the month of Apr-18. However, during 10MFY18, sales volume of HSD and MS raised by 3%YoY and 10%YoY respectively while during 10MFY18, sales volume of FO declined by 27%YoY.
  • In Apr-18, company wise data shows that overall sales volume of HASCOL and APL swelled by 27%YoY and 4%YoY respectively, while PSO and Shell showed a sharp decline of 33%YoY and 29%YoY respectively. This was a result due to government policy to move away from FO based electricity generation, which led to lower sales volumes and consumption by IPP's for FO.
 
Apr 11, 2017
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#44
Oil Marketing Companies: Higher inventory gains lifts earning growth

09 May 2018
Azee Securities (Pvt.) Ltd.




  • Our today's morning report is based on the performance of Oil Marketing Companies (OMC) in 3QFY18. Our sample includes four listed companies i.e. Pakistan State Oil (PSO), Hascol Petroleum Limited (HASCOL), Attock Petroleum Limited (APL) and Shell Pakistan Limited (Shell).
  • During the 3QFY18, the performance of the Oil marketing sector remained strong with the cumulative bottom-line of the listed companies reflecting an increase in profit after tax (PAT) of Rs 8.24 billion compared to Rs 7.11 billion in 3QFY17, reflecting hike of 16% YoY. Surge in profitability was primarily resulted from 1) inventory gains on account of rise in international oil prices followed by surge in ex-refinery prices, 2) increase in regulated margins and 3) higher other income.
  • Despite lower volumetric sales, revenue of above listed companies hike by 9% YoY to Rs 368.57 billion from Rs 336.65 billion in 3QFY17 owing to increase in product prices. Crude oil prices increases by average 23% YoY to $58.70/barrel in 9MFY18 versus $47.80/barrel in 9MFY17. Cumulative volumetric sales of petroleum products fall at 5.04 million tons from 5.84 million tons in 3QFY16, depicting decline by 14% YoY. This is primarily due to lower consumption of furnace oil as the government shifted its focus from furnace oil to LNG and Coal consumption for power sector. Furnace oil volumes decline by 50% YoY to 1.01 million tons in 3QFY18 against 2.01 million tons in 3QFY17 due to above maintained factor.
  • However, Motor Spirit (MS) and High Speed Diesel (HSD) volumes improved by 6% YoY & 5.6% YoY to 1.71 million tons and 2.03 million tons respectively. Due to inventory gains, gross profit surged by 20% YoY to Rs 19.84 billion as against Rs 16.59 billion 3QFY17. Gross profit margin also up by 5.4% as compared to 4.9% during the corresponding period last year. Hence, net margin also enhanced from 2.1% to 2.2% during the period.
 
Apr 11, 2017
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#45
Pakistan Oil Marketing Companies: White Oil Pipeline: Lower HSD sales but better IFEM management


10 May 2018
Insight Securities (Private) Limited




  • Much awaited white oil pipeline from Karachi to Machike is finally expected to commission in 2019, as per recent news flows. Apart from safer, faster and greener transportation of petroleum products to upcountry, commissioning of the pipeline would also result in more efficient IFEM mechanism and lower HSD consumption by oil tankers. Although exact numbers would be difficult to calculate owing to limited availability of information, we have tried to gauge the impact of the pipeline on domestic demand and OMCs
  • Currently, majority of motor gasoline is transported from Karachi to upcountry in tankers which run on diesel and contribute about 3% to diesel’s total country demand. To reach this estimate, we have assumed 35,000 litres average tanker capacity, 2 liters/KM fuel efficiency of the tankers and 1,289KM (one-way) road distance between Karachi and Machike. Accordingly, shift to pipeline could result in 269m litres lower domestic HSD demand. Based on current market share of OMCs, this could translate in 107m/20m/43m/26m lower HSD sales volume and PKR0.61/PKR0.35/PKR0.56/PKR0.59 lower EPS for PSO/SHEL/HASCOL/ APL (see table below).
  • Total cost of the pipeline is around ~US$300m (US$200m between Karachi to Mehmood Kot and US$100m estimated between Mehmood Kot to Machike) with equity stake of Pak Arab Refinery (51%), followed by SHEL (26%), PSO (12%) and Total Parco (11%), as per news flows. Using pipeline rather than tankers for transportation would also result in significant cost savings for the country as quantum of Inland Freight Equalization Margin (IFEM) would reduce. However, impact of this on OMCs and end consumers would be insignificant as current IFEM makes up only 4% (PKR3.75/liter) of total Petrol retail price.
 
Apr 11, 2017
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#46
Sui Southern Gas Company (SSGC): ECC allows UFG on RLNG as pass through


14 May 2018
Topline Securities (Private) Limited



  • As per news reports reports, Economic Coordination Committee (ECC) has approved a summary sent by Petroleum Division on issue pertaining to higher Unaccounted for Gas Losses (UFG) on account of supply of RLNG by Sui Southern Gas (SSGC).
  • Few of the key points pertaining to the summary included 1) SSGC may be allowed UFG based on RLNG handling basis (volumetric basis) in the sale price of RLNG in the form of distribution loss due to swapping arrangement and consumption of RLNG in its franchise area, 2) distribution loss to be determined and charged at actual including the losses due to swapping arrangements and consumption of RLNG in SSGC franchise area.
  • To recall, Pakistan started importing RLNG from Mar 2015 when RLNG dedicated pipelines were not existence and it was decided that the existing infrastructure will be used for supply of RLNG. A swapping agreement between Sui companies was also signed where imported RLNG was being used in Sindh province and equivalent energy units of indigenous gas are transferred to SNGP by SSGC in lieu of RLNG.
 
Apr 11, 2017
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#47
Oil & Gas Regulatory Authority : OGRA held Public Hearing for SSGC


14 May 2018
Taurus Securities Limited




  • OGRA has held a public hearing after a petition filed by SSGC for Determination of Estimated Revenue Requirement (ERR) for FY 2018-19.
  • To recall, Economic Coordination Committee (ECC) has allowed UFG losses on RLNG being borne by SSGC to be made part of price of RLNG supplied to RLNG consumers. Previously, a summary was forwarded by the Petroleum Division which the ECC approved in their last meeting.
  • SSGC has been experiencing UFG losses due to RLNG swap agreement with SNGP wherein the former is consuming RLNG into its Karachi network while transferring indigenous gas in lieu of RLNG. This has resulted into higher UFG specifically in Karachi due to low specific gravity of RLNG having impact on gas flow rates.
  • The petitioner has asked for a PKR 109.03/mmbtu increase in gas prescribed prices (applicable to Sui companies) due to rise in wellhead prices after PKR devaluation and increase in crude oil prices. The petitioner also added that the asked price increases relate to current year.
  • Another important development regarding SSGC, was that a motion has been passed to review the Final Revenue Requirement (FRR) by OGRA for SSGC, for FY 2016-17.
  • Fixed asset CAPEX in Transmission, Distribution, LPG Air Mix, and Other Assets, petitioned by the Company for FY19 is PKR 25.37bn which is 1.49x higher than revised estimates for FY18.
 
Apr 11, 2017
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#48
Oil & Gas Marketing Companies: UFG enhancement to have a one-off cash flow impact


18 May 2018
Insight Securities (Private) Limited




  • As per news flows, Economic Coordination Committee (ECC) has approved to enhance Unaccounted for Gas (UFG) losses allowance of SUI Companies (SNGP and SSGC) to 7.6% from average 7% (Ranging from 6.7%-7.1%) for FY2013-FY2017. To recall, OGRA had opposed petroleum division’s proposal to enhance UFG losses for the past year.
  • Petroleum Division has calculated accumulated impact of the relief at PKR11.3b for SSGC and PKR6.5b for SNGP. However, as per news flows, backdated adjustments to financial accounts of the companies will be made. Hence, the impact of the relief would not reflect on current/prospective income statements of the companies, as per our understanding.
  • The total amount of ~PKR18b (PKR11.3b+PKR6.5b) will be recovered from gas consumers where the gas prices are likely to be increased. If the amount is received, one-off before tax cash flow impact on SSGC and SNGP would be PKR12.8/share and PKR10.3/share, respectively.
 
Apr 11, 2017
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#49
Oil & Gas Marketing Companies: ECC allows recovery of Rs18bn UFG losses for Gas companies –By Topline Research


18 May 2018
Topline Securities (Private) Limited




  • Economic Coordination Committee (ECC) of the cabinet has allowed gas companies to recover Rs18bn worth of ECC allows recovery of Rs18bn UFG losses for Gas companies ? Economic Coordination Committee (ECC) of the cabinet has allowed gas companies to recover Rs18bn worth of UFG losses on retrospective implementation of increased UFG benchmark of 7.6%.
  • To recall, OGRA had approved a revised UFG benchmark study that allowed gas companies to increase benchmark from 4.5% to 7.6% on p p ros ective basis that was to be applicable from FY18 (SNGP already incorporated this new benchmark in 9MFY18 accounts). In this latest development, ECC has also allowed gas companies to enjoy this minimum benchmark of 7.6% for previous years that is from FY13 to FY17
  • As per news reports and as per our estimates, this will provide a one-time impact of Rs11.25bn (Rs8.9/share) to SSGC and Rs6.5bn (Rs7.2/h ) s are to SNGP
 
Apr 11, 2017
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#50
Oil & Gas Marketing Companies: ECC allows higher recovery of UFG losses after UFG study proposals


18 May 2018
Taurus Securities Limited




  • In their recent meeting, Economic Coordination Committee (ECC) has allowed higher recovery of UFG losses to Sui companies, after the proposals of UFG study.
  • UFG benchmark has been allowed at 7.6% prospectively, along with a retrospective impact based on the UFG study.
  • As per news flows, the retrospective impact pertaining to the periods FY13-17 will entail a positive one-time financial impact of PKR 11.25bn for SSGC and PKR 6.54bn for SNGP (Per share impact: PKR 8.9/7.2 respectively). Furthermore, this retrospective impact will be adjusted in prior period
 
Apr 11, 2017
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#51
Oil & Gas Marketing Companies: Fuel sales post encouraging improvement on a sequential basis


04 June 2018
JS Global Capital Limited


  • As per sources, fuel sales during May-2018 posted increase of 31% MoM to clock-in at 2,449k tons. On a YoY basis however, sales remained 1% YoY lower.
  • Motor Spirit (MS) sales showed improvement of 5% YoY to clock-in at 637k tons. On a sequential basis however, this translates into a decline of 2% MoM.
  • High Speed Diesel (HSD) sales remained flat as compared to May-2017 but improved as compared to Apr-2018 by 15% MoM to clock-in at 889k tons
  • This month’s star performer was Pakistan State Oil Limited (PSO) with sequential improvement of 11.1ppt in market share in fuel sales. The company showed the highest increase vis-à-vis Apr-2018 (+66% MoM).
 
Apr 11, 2017
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#52
Oil & Gas Marketing Companies: OGRA issues new Tariff regime for Sui Companies


04 June 2018
Taurus Securities Limited




  • Oil and Gas Regulatory Authority (OGRA) has issued new Tariff regime for Gas Distribution Companies where the proposed rate of return stands higher than the initial proposed draft.
  • Under the new regime, fixed rate structure used to calculate rate of return on assets and subsequently profitability, would be replaced with a Weighted Average Cost of Capital (WACC).
  • The new rate of return calculated for the Transmission assets is 16.28% while for Distribution is 17.43% as against to the rate of returns of 12.70% and 11.83% for Transmission and Distribution assets respectively initially proposed in Draft regime, higher rate of return emanates due to use of a pre-tax WACC.
  • Moreover, tax will not be treated as a pass through item as initially proposed; this is also explained due to a pre-tax WACC used for return purposes.
 
Apr 11, 2017
830
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#53
Oil & Gas Marketing Companies: Favourable tariff regime for the Gas sector


04 June 2018
Pearl Securities Limited




  • OGRA’s has approved the new tariff regime applicable to gas utilities (SSGC & SNGP) based on weighted average cost model. The regulator has reviewed the whole tariff model whereby the return of the gas utilities will now be based on market determined factors instead to previously applicable fixed return regime (17% SSGC & 17.5% SNGP), thus allowing the return to account for changes in market dynamics.
  • According to notification, the companies would receive market based rate of return on the value of their fixed assets in operations (Regulatory asset base). At present, the authority has approved WACC of 16.28% and 17.43% for transmission and distribution networks respectively.
  • Whereas, the WACC shall be fixed for the next 3 years during which if it changes by +/- 2% compared to set reference figure. It will automatically reset and become effective in ORGRA’s next determination of revenue requirement.
 
Apr 11, 2017
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#54
Oil Marketing Companies: FO sales resume, Flat POL vol during May’18


06 June 2018
Pearl Securities Limited


  • According to latest POL sales numbers, OMCs’ sales volume registered a decline of 3%YoY to 22.53mn tons during the 11MFY18 as compared to 23.31mn tons in the corresponding period last year. Industry POL volumes plunged due to the sector wide fall in Furnace oil (FO) sales on the back of lower FO based generation, this also overshadowed the growth momentum in retail fuels.
  • In white oil segment, growth in retail fuel volumes fueled 10%YoY increase at 6.73mn tons during 11MFY18 on the back of rising automobiles sales & increase in disposable income. High Speed Diesel (HSD) followed a similar trend, grew 7%YoY at 8.37mn tons as increased commercial & business activity witnessed in the economy during the period. It is important to note, as the government obstructed non-filers from purchasing new motor vehicles (local & imported), the white oil demand may see a slowdown in its growth going forward.
  • The industry FO sales declined by 24%YoY to 6.49mn as share of FO based generation in total energy mix of the country fell sharply during 11MFY18 following a change in Govt’ policy in the favor of more efficient and cost-effective fuel (RLNG & Coal) based plants. However, on sequential basis in May’18, FO sales volumes increased substantially by 132% to 857k tons. This is due to the temporary revival of FO based generation to meet the surge in power demand that has peaked at around ~20,000MW in summers.
 
Apr 11, 2017
830
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#55
Oil & Gas Marketing: OGRA introduces market based tariff regime for twin Sui companies


06 June 2018
Aba Ali Habib Securities (Private) Limited




  • Oil and Gas Regulatory Authority (OGRA) has recently introduced new tariffs regime for gas distribution companies where the rate of return of these company under newly approved tariff structure will stand higher than previously proposed tariff draft.
  • The new tariff model is based on WACC (Weighted Average Cost of Capital) which reflects the prevailing market conditions, hence, the rate of return on the assets of gas distribution companies will be market adjusted.
  • As per OGRA's recent notification, the gas distribution companies are entitled to receive WACC based rate of return on the value of their fixed assets under operation at the current appropriated rate of 16.28% and 17.43% for transmission and distribution operations respectively. Which is higher than the previously proposed rate of 11.83% and 12.70% for transmission and distribution respectively.
  • Previously Sui Northern Gas Pipelines Limited (SNGP) and Sui Southern Gas Company Limited (SSGC) used fixed rate of 17.5% and 17%, respectively, to record return on its average operating assets.
 
Apr 11, 2017
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#56
Oil Marketing Companies: May-18: OMC's sales volume decreased by 1% YoY


07 June 2018
Spectrum Securities (Private) Limited




  • In May-18 total sales volume of OMCs (HSD, MS, and FO) decreased by 1%YoY compared to May-17. FO, MS, HSD sales volumes were declined by 1%, 0.1% and 2% YoY respectively in May-18.
  • FO and HSD sales volumes grew by 142% and 16% MoM for the month of May-18, while MS sales dropped by 3% MoM. However, during 11MFY18, sales volume of HSD and MS raised by 2%YoY and 9%YoY respectively while during 11MFY18, sales volume of FO declined by 24%YoY.
  • In May-18, company wise data shows that overall sales volume of HASCOL swelled by 19% YoY respectively, while PSO, APL, and Shell showed a decline of 1%, 5% and 25% YoY respectively. This was a result of government policy to move away from FO based electricity generation, which led to lower sales volumes and consumption by IPP's for FO, but as of May-18 FO sales are back on track since GoP realized that remaining power project of LNG and Coal will not start on time, coupled with rising electricity demand.
 
Apr 11, 2017
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#57
Oil Marketing Companies: Higher FO sales boost OMC volumes


11 June 2018
Azee Securities (Pvt.) Ltd.




  • The consumption of Petroleum products in the month of May increased by 31% MoM to 2.44 million tons against 1.86 million tons in April 2017 owing to rise in volumetric sales of Furnace oil (FO) and High Speed Diesel (HSD).
  • Furnace oil volume massively increase by 132% MoM to 857k tons in May'18 versus 370k tons in April '18 due to higher demand of RFO base power plant. However, sales marginally up by 1% YoY in May'18 to 2.44 million tons when compared to sales of 2.43 million tons in May'17 due fall in furnace oil sales by 1% YoY.
  • Overall oil sales in the country declined by 4% YoY in 11MFY18 to 22.52 million tons as against 23.49 million tons in 11MFY17 owing to drop in consumption of furnace oil. The furnace oil sales decreased by 24% YoY in 11MFY18 to 6.49 million tons as against 8.59 million tons in 11MFY17 as the government shifted its focus from Furnace oil (FO) to LNG and Coal consumption for power sector. The sales of Motor Spirit (MS) and High Speed Diesel (HSD) however remained higher as it grew by 10% YoY and 7% YoY in 11MFY18 to 6.72 million tons and 8.36 million tons respectively.
 
Apr 11, 2017
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#58
Oil & Gas Marketing Companies: Will margin increase solve the problem?


11 June 2018
JS Global Capital Limite


  • News reports surfaced over the weekend highlighting that Economic Coordination Committee (ECC) approved margin increases for Motor Spirit (MS), High Speed Diesel (HSD) and Liquefied Natural Gas (LNG).
  • Although official notification is pending, our discussions with the industry officials suggest that the same is expected after Eid-ul-Fitr.
  • Margins on MS are expected to be revised up by Rs0.09/litre whereas margins on HSD will go up by a larger quantum of Rs0.24/litre.
  • Margin increase of 1.25ppt is also approved for LNG, counting to 3.75% from 2.50% earlier (US$0.11/mmbtu at current prices)
 
Apr 11, 2017
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#59
Oil & Gas Marketing Companies: Turbulent end to FY18 is not of their own making


14 June 2018
AKD Securities Limited




  • A shaky start to June'18 has materialized in the form of some negative developments for domestic OMCs, namely: 1) sustained hike in cost of supply signified by Jun'18 ex-refinery prices for MS/HSD rising 10/18%MoM and 47/66%YoY - the highest point in 3.5yrs and 2) domestic POL price levels hiked through raising GST (now at 10.7/14.4% of selling price for MS/HSD) taking cumulative MS/HSD pump prices to rise by 18.7/22.5% CY18TD.
  • At the forefront is the weakening of marginal consumption and hampered discretionary demand for retail fuels. Additionally, the recent mid-month weakening of the PkR vs US% of ~4% opens OMCs to additional weakness from exchange losses, as regional crude benchmarks indicate little room for inventory-based gains (except for de-regulated FO). Moreover, our back of the envelope calculations suggests exchange losses at PSO/HASCOL/APL to amount to PkR0.61/0.92/0.88/sh for 4QFY18/2QCY18E. PSO continues to appeal on the back of continuation of RLNG shipments (segment to near MS's contribution to GP, covering up the demise of FO), possible RLNG margin hike and FE-25 arrangements (even if receivables are raised for PkR depreciation). At our current TP of PkR399/sh, PSO offers an upside of 22% from current price level.
  • The ECC has reportedly recommended to raise the OMC margin on HSD/MS by PkR0.23/0.09/litre to PkR2.64/litre each (vs. PkR2.41/2.55/litre previously) and dealer margin on HSD/MS by PkR0.26/0.12/litre to PkR2.93/3.47/litre (vs. PkR2.67/3.35/litre previously). Additionally, the ECC has recommended to raise PSO/PLL margin on LNG from 2.50% at present to 3.75%. Applicable from FY19F, we await notification of the same to incorporate these into our estimates. Citing events leading to a reluctant margin indexation during FY18, we believe these measures may be anything but smooth sailing, with final say on OMCs and dealer margin indexations being left to the incoming Government.
 
Apr 11, 2017
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#60
Oil & Gas Marketing Companies: Gas price & likely impact on key sectors


25 June 2018
Sherman Securities (Pvt.) Ltd.




  • OGRA (Oil & Gas Regulatory Authority) has given its decision in favor of both Sui Northern Gas pipeline (SNGPL) and Sui Southern Gas pipeline (SSGC), to raise their prescribed prices upto 300% for domestic users while 2-30% for various industries. The decision is taken after consultation with various stake holders over the last few months.
  • According to the document posted on the website of OGRA, the total revenue impact of gas price hike as per both the utilities is estimated to be over Rs190bn. We believe that the hike in gas price is a result of increase in cost of gas over the last few years owing to upward revision in wellhead gas prices mainly led by higher oil prices and change in gas pricing policies.
  • We believe that the final decision to increase gas price for various consumers rest with the new government. Our discussion with various industry sources suggest that such a big decision is likely to be taken by the new government. There are chances that the government may not fully pass on the impact, we believe.
  • Amongst major sectors, fertilizer companies may increase urea and DAP prices to offset the impact of hike in gas prices. This is due to the fact that lower inventory levels and higher international fertilizer prices may compel local manufacturers to pass on the impact to consumers.