Oil and Gas share price target

The government has, post a short delay, notified the new gas pricing norms on the 7th of April (link here) which is broadly in line with the Kirit Parikh committee (KPC) recommendations issued a few months ago.

We expect Q4FY23E earnings for the 12 oil & gas companies under our coverage to show strong sequential improvement, with operating earnings (EBITDA) likely to rise 10%/20% YoY/QoQ to Rs833bn and net income to be up 2%/26% YoY/QoQ to Rs438.2bn.

The philosopher Michel de Montaigne once said that, “There is no passion so contagious as that of fear.” The fear of a financial crisis that started at the headquarters of Credit Suisse quickly spread to Wall Street and the stock markets world over. Last week, it knocked at the door of oil markets which were otherwise going steady in the hopes of a brighter 2023.

We have recently highlighted our positive outlook on the gas space for FY24E driven by i) Kirit Parikh Committee (KPC) recommendations to reduce domestic gas costs for priority sector, ii) rising domestic supplies, iii) relatively moderate LNG costs, and iv) stronger prices of industrial fuel alternatives (propane, FO, naphtha).

Brent crude prices have remained flattish over the past few months, with limited traction seen in demand in the near term. There has been no material disruption in Russian crude shipments despite the price cap by EU coming into force w.e.f 5th Feb 2023.