Oil India- has its time come?

Just went through the earnings call and came across a few things that will have a substantial effect on the next quarter’s results:

1. Gas production fell by 3.5% due to the shutdown of the Numaligarh refinery and a couple of other fertilizer plants. This will be normalized in Q2 as NRL is operating at more than 100% levels.

NOTE: This makes me even more bullish about the effect of the commissioning of the Indradhanush pipeline on OIL. The commissioning will lead to increased offtake of natural gas to the rest of India and prevent lower offtake of gas that happens for one quarter every year due to the shutdown of NRL and other regional fertilizer plants. The management mentioned that a part of the new pipeline will get commissioned in December this year.

2. Oil Sales as a % of production was at 91% against a normalized level of 96-98% because of the buildup of inventory at the Numaligarh refinery. This inventory will be sold in Q2 and will lead to a windfall.

3. The increased production of nearly 3-5% every quarter is very encouraging as this will change the perception of Indian Oil PSUs which have depressed valuations due to the historical fall in production every year. This also leads to a disproportionate benefit as the new production is not burdened by the windfall tax and will be sold at a substantially higher rate.

This also applies to new natural gas production which will get a 20% premium to the current APM prices.