OilVoice - Essar Oil Reports Strong Financial Results

Essar Oil Reports Strong Financial Results

Thursday, July 23, 2009

Essar Oil Limited has reported strong financial results against the backdrop of volatile crude prices and weak product margins. The company has reported a 104% rise its EBITDA for the first quarter of 2009-10 as compared to the first quarter of the last financial.

The EBITDA for Q1 FY 2010 stood at Rs 667 crore compared to Rs 326 crore during Q1 of FY 2009. The Profit After Tax (PAT) during the same period stood at Rs 169 crore as compared to Rs 30 crore, up by more than 450%. Gross turnover for the first quarter of FY 2010 stood at Rs 7,895 crore. It may be recalled that the company had a gross turnover of Rs 41,856 crore for the 11-month period of May 2008 till March 2009.

Refinery Operations
The significant developments pertaining to the refinery are as follows:

- The company had taken a planned shutdown for maintenance, inspection and capacity augmentation between 16th April and 3rd May, 2009. Commencement of operations at the refinery was started one day ahead of schedule. The refinery is currently operating at 14 MMTPA at a capacity utilization of 133%.
- Total crude processed in the 1st quarter of FY 2010 has been 2.76 MMT
- Production of higher margin light and middle distillates has jumped to 74% during Q1 of FY 2010 from 67% all products during Q1 of FY 2009
- There has been no Loss Time Incident (LTI) during the last quarter, a pointer to the highest standards of safety policy being followed by the company.

Marketing operations
Another significant achievement of the company has been the re-opening of 1252 of its retail outlets with 53 new outlets having been added during this quarter. Essar Oil is the first private company in India to enter the petro retailing sector through a franchisee model. Some of the major developments are:

- The total retail sales has been the highest in this quarter ever till date; now accounting for almost 16% of total domestic sales of the company
- Company sold 1.71 MMT of products to our PSU customers in during Q1 of FY 2010. The quarter also saw the highest ever direct sales of black oil, contributed by the best ever sales of both fuel oil and bitumen. The company now has a market share of 7% in fuel oil an 13% in bulk bitumen
- Helped by the surge in direct and retail sales, the company has clocked a domestic sales proportion of 88% by value during this quarter, much higher than the 70% it achieved in Q1 of FY 2009
- The company is making significant efforts to increase its non-fuel revenues to complement its retail sales
- Plans afoot to expand retail outlets to 1500 during FY 2010.

Future Outlook
Phase 1: The first phase of the expansion project of the refinery is under way to expand its capacity to 16 MMTPA at a Nelson Complexity Index of 11.8 by December 2010 and necessary financing has been tied up.

Phase 2: Considering the impact of global macro economic development, the completion schedule of Phase 2 of the Expansion Project (18 MMTPA) has been reviewed to ensure that the expansion in capacity matches with the global demand. The expansion to 34 MMTPA at a Nelson Complexity Index of 12.8 is expected to be completed by December 2011.

Exploration and production
At the Raniganj CBM block, the Minimum Work Program for Phase 1 has been completed within the scheduled time. 15 test wells have been drilled and hydrofracturing has been carried out to improve the gas flow. In addition, innovative technique of air-drilling employed by our CBM team has helped us achieve significant cost reduction in drilling costs.

Speaking on these results, Mr Naresh Nayyar, Managing Director, Essar Oil Limited said, “In spite of difficult external factors, the results highlight the commitment and tenacity of the company. The opening up of our retail outlets together with the addition of new outlets has been a step in the right direction towards the company’s vision of spreading its products pan India. In addition, we are very proud of our commitment towards world-class safety procedures which form an intrinsic part of our work culture”.

The above results were taken on record at the meeting of the Board of Directors of the company held on July 20, 2009.