Time for a contrarian view in BPCL/HPCL
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Ashok Sinha
CMD, Bharat Pe= troleum |
What is BPCL’s game plan in the upstream business?
We are increasing investments in exploration and = production through our 100% subsidiary Bharat Petro Resources. We have inter= est in 24 blocks, of which nine are in the KG basin, Rajasthan and Mahanadi,= and the rest abroad. We already have committed investments of over Rs 1,000= crore in the next two years, and plan to invest more. Last year, we bought = stake in three North Sea blocks with Tata Petrodyne and in Australia, Timor = and Oman. Brazil is a large oil-producing nation and this acquisition gives = us a foothold there. We will continue to look at more opportunities.=20
What are t= he prospects of finding oil in Brazil?
EnCana Brasil’s work on 10 blocks is due to end by 2009. We will k= now the full picture only when this is complete. But this is not a wildcat o= peration as there are other oil-producing wells in the same basin. The block= s seem prospective, though we have not reached the stage of putting any figu= re on reserves. We will be working with Petrobras, a leading oil producer in= the region. No one knows those basins better than them and they are among t= he largest producers of oil from deep waters. Petrobras are operators in sev= en of the 10 blocks, though we will be with them on the operating and manage= ment committees.=20
Oil compan= y valuations have been sky-rocketing globally. Have you paid a premium for t= he acquisition?
Valuations of= producing fields are being impacted by high oil prices. Since there is no c= ash flow for exploration players like EnCana Brasil, the valuation is based = on how much has been invested in the block. I think we’ve got a good deal wi= th an investment of around $4-$5 million per block, with Videocon investing = a similar amount. We have a partnership with Videocon in other blocks and lo= ok at it as a way of reducing risk. If the projects get big in the future, w= e could look at getting more partners
A consortium of oil refiner Bharat Petroleum Corp Limited (BPCL) and Vid= eocon Industries has decided to buy Brazil's EnCana Brasil Petroleo Limi= tada for about $165 million (about Rs 675 crore). Videocon, a diversified group whose businesses range from power to home = appliances, and Bharat PetroResources Ltd (a subsidiary of BPCL) are equal p= artners in the consortium that will buy EnCana Brasil Petroleo from Canadian= natural gas producer EnCana Corp and 749793 Alberta Ltd, the companies said= in separate statements to the Bombay Stock Exchange.=20 BPCL, which did not disclose financial details, said the deal was for in= terests in 10 deepwater offshore exploration blocks in four concessions in B= razil. The sale, which will be effective retrospectively from January 1, 2007, = is subject to regulatory approval, pre-emptive right associated with certain= assets, and is expected to close in the first quarter of 2008. Indian companies have stepped up the pace of foreign acquisitions, strik= ing deals worth more than $16 billion (about Rs 65,600 crore) to late-August= this year, up from $6.2 billion (about Rs 25,400 crore) in the same period = a year earlier, data from Dealogic showed. State-run BPCL, the country's= third-biggest refiner, said earlier this month that it would spend up to $3= 70 million (about Rs 1,500 crore) on exploration over two-three years, targe= ting small stakes in development and producing fields in West Africa, Brazil= , South America and Australia.=20 BPCL, which has stakes in 14 oil and gas blocks in India and abroad, had= set up Bharat PetroResources to spearhead its exploration drive, which it e= xpects will offset under-recoveries in refining and marketing. Shares in Videocon closed 0.48 per cent down at Rs 366 on the Bombay Sto= ck Exchange, whereas BPCL was among the top gainers, up 0.5 per cent on the = BSE at 310.60 in a generally firm market. Cheers
On 9/14/07, E= shers <eshers@gmail.com> wr= ote: =20
BPCL: South American Ho Niraj Bhatt / Mumbai September 14, 2007
The company, together with Videocon, is in talks with two Canadian firms= for the purchase of EnCana Brasil Petr=F3leo. Bharat Petroleum is expanding its upstream oil expl= oration activities, at a time when its key oil marketing business has been g= rappling with surging under-recoveries.
This PSU oil marketing compa= ny, via its 100 per cent subsidiary Bharat PetroResources, and Videocon Indu= stries, have entered into an agreement with EnCana Corporation, Canada and 7= 49793 Alberta, Canada, for purchase of shares on a 50:50 basis for Brazil-ba= sed EnCana Brasil Petr=F3leo.=20
This transaction is for interests in 10 deep water offshore explorat= ion blocks in Brazil. According to EnCana, the sale is priced at $165 millio= n (about Rs 670 crore), before closing adjustments, which will mean that BPC= L will be investing Rs 335 crore for its 50 per cent stake.=20
Prior to this deal, BPCL had also taken a 25 per cent stake in a con= sortium for oil exploration activities for certain blocks in the North Sea a= nd also in East Timor.
However, the company's downstream oil marketing business has faced a= difficult operating environment due to surging global crude oil prices. Analysts highlight that BPCL, like other oil marketing companies, is cur= rently grappling with under-recoveries to the extent of Rs 4.8 per litre for= diesel and Rs 173 per domestic LPG cylinder. Upstream companies such as ONGC share a portion of under-recoveries of o= il marketing companies, in addition a cushion for BPCL's margins in the = September 2007 quarter is also expected from stronger gross refining margins= on a y-o-y basis.=20 Also, PSU oil marketing companies are awaiting receipt of oil bonds from= the central government and that is also expected to improve their financial= position. In the June 2007 quarter, BPCL's standalone operating profit (exclud= ing other income) was Rs 206 crore as compared with an operating loss of Rs = 260.9 crore in the previous year, thanks to strong GRMs on a y-o-y basis. Th= e BPCL stock gained=20 0.5 per cent to Rs 310 on Thursday. CHeers
On 8/24/07, E= shers <eshers@gmail.com> wr= ote:=20
Hi,I'm just wondering whether it makes sense to take a contrarian view= on these battered oil companies. BPCL at 300 offers lot of value and good y= ield. Long term there will be an appreciating rupee and the gasoline prices = i believe is at its 4 yr low. Appreciate members views .=20Cheers–
I work in the IT industry and passio= nate about markets. Active in the markets for the last 5 years. Reading abou= t legends like Buffett, Munger, Peter lynch etc gave some good insights abou= t investing and markets.. Great Fan of Ramesh Damani.. His chats since redif= f days helped me a lot to understand and learn (whatever little i= have learned) about markets.=20Prefer concenrated Portfolio and long-term investing. My core holdin= gs are Infosys, Nucleus, KLG Systel, M&M , PLNG.I normally avoid cyclica= ls, Commodities..
–=20
I work in the IT industry and passionate about markets. Active in the ma= rkets for the last 5 years. Reading about legends like Buffett, Munger, Pete= r lynch etc gave some good insights about investing and markets.. Great Fan = of Ramesh Damani.. His chats since rediff days helped me a lot to= understand and learn (whatever little i have learned) about markets.=20Prefer concenrated Portfolio and long-term investing. My core holdin= gs are Infosys, Nucleus, KLG Systel, M&M , PLNG.I normally avoid cyclica= ls, Commodities..
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I work in the IT industry and passionate about markets. Active in= the markets for the last 5 years. Reading about legends like Buffett, Munge= r, Peter lynch etc gave some good insights about investing and markets.. Gre= at Fan of Ramesh Damani.. His chats since rediff days helped me a lot &= nbsp;to understand and learn (whatever little i have learned) about markets.= =20Prefer concenrated Portfolio and long-term investing. My core holdin= gs are Infosys, Nucleus, KLG Systel, M&M , PLNG.I normally avoid cyclica= ls, Commodities..
–
I work in the IT industry and passionate about markets. Active in= the markets for the last 5 years. Reading about legends like Buffett, Munge= r, Peter lynch etc gave some good insights about investing and markets.. Gre= at Fan of Ramesh Damani.. His chats since rediff days helped me a lot &= nbsp;to understand and learn (whatever little i have learned) about markets.= =20
Prefer concenrated Portfolio and long-term investing. My core holdin= gs are Infosys, Nucleus, KLG Systel, M&M , PLNG.I normally avoid cyclica= ls, Commodities..
