INSUBCONTINENT EXCLUSIVE:
India imports more than 80% of its crude oil.Anyone who has lately bought groceries, paid rent, or filled the tank of their car has faced
inflation.The prices of everyday essentials have been steadily rising for almost a year owing to hikes in fuel prices, supply-chain
constraints and global shortages of products.In the last few weeks, fuel costs have increased remarkably across India
A litre of petrol costs Rs 109.98 in Mumbai, while diesel rates stand at Rs 94.14 per litre.The price of edible oil is also escalating.The
primary reason behind the rising prices of consumer products is crude oil.In the wake of the Ukraine-Russia crisis, crude oil continues to
it extended gains above $100 on supply-related concerns as tensions escalated between Russia and Ukraine.On Thursday, brent crude futures
touched almost $120 per barrel, the highest intraday level seen in nearly a decade
Following Russia's attack on Ukraine, the benchmark oil contract entered three digits last week.According to reports, India, which imports
more than 80% of its crude oil, is expected to almost double its import bill to more than $100 billion by the end of the financial year
2021-2022.Oil prices are expected to become extremely volatile
So investors should be careful before taking any position in any company related directly or indirectly to the oil - gas industry.Here's the
list of stocks set to benefit as crude oil prices hit the roof.1
Oil IndiaOil India (OIL) is engaged in exploration, development and production of crude oil and natural gas, transportation of crude oil and
production of liquefied petroleum gas (LPG)
It also provides various exploration and production (E-P) related services for oil blocks.For the December 2022 quarter, Oil India reported
37% jump in net profit as it benefitted from a rise in international oil prices
The state-owned company's net profit stood at Rs 1,240 crore for the third quarter compared to Rs 900 crore a year back.The firm's natural
gas production rose 18% to 0.8 billion cubic meters in December quarter, crude oil production was almost unchanged at 0.8 million tonne.The
board of OIL declared a second interim dividend of Rs 5.75 per share for 2021-22 which resulted in total interim dividend till date of Rs
9.25 per share for the fiscal year.Oil India is poised to benefit from an increase in the price of crude oil.The current Russia-Ukraine war,
which propelled global crude oil prices might lead to a bumper March quarter for India's oil and gas companies.Even if crude oil or gas
prices goes up by only US$1 a barrel, it will positively impact company's profit and valuations.Also, the company is likely to gain from a
cyclical improvement in refining margins as it holds 70% stake in Numaligarh Refinery (NRL)
Last year in April, OIL and Numaligarh Refinery entered into a partnership.In the last week, shares of Oil India have rallied up to 10% on
In the last six months, the company has outperformed the market, having surged by 39%.2
ONGCThe second stock on our list is Oil - Natural Gas Corporation (ONGC)It's the largest government-owned-oil and gas exploration and
production corporation in the country
It produces around 70% of India's crude oil
This is equivalent to around 57% of the country's total demand
It also produces around 84% of India's natural gas.It's involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins of
It owns and operates over 11,000 km of pipelines in the country
Its international subsidiary ONGC Videsh currently has projects in 17 countries.Presently, ONGC has stakes in three projects in Russia - 20%
in Sakhalin, 26% in Vankorneft, and 100% in Imperial.Recently, ONGC stated it does not expect any impact on operations in any of its Russian
projects, and that ruble devaluation will likely increase its profit.The company said it did not foresee any challenge in selling its share
of crude from Russian oilfields or repatriating dividends from there in the current situation.ONGC Videsh said,Based on present applicable
sanctions and removal of five Russian banks from SWIFT arrangement, the company does not foresee any challenge in selling crude oil or
repatriating dividends except that scrutiny of financial transactions may be higher than usual.Apart from this, ONGC also benefits from the
rise in global natural gas prices given that a large share of the company's revenues are generated through sale of gas.When the rates are
revised in April, the increase in global natural gas prices is expected to result in a more than doubling of domestic prices.In September
2021, the government had raised natural gas prices by 62% for the first time in two years tracking the rise in global natural gas
prices.ONGC's shares have gained 84% in the past one year, while in the last 5 days, share price of the company went up by 7%.For more
details, check out ONGC's financial fact sheet and quarterly results.3
GAIL IndiaGAIL India, a government of India undertaking, is an integrated natural gas company in India.It owns over 11,500 km of natural gas
pipelines, over 2,300 km of LPG pipelines, six LPG gas-processing units, and a petrochemicals facility.It also has a joint-venture interest
in Petronet LNG, Ratnagiri Gas and Power, and in the CGD business in several cities.GAIL has wholly owned subsidiaries in Singapore and the
US for expanding its presence outside India in the segments of LNG, petrochemical trading, and shale gas assets.Through its initiative
‘Pankh', GAIL has started investing in start-ups operating in focus areas, which includes natural gas, petrochemicals, energy, project
management, bio-manure marketing, nano materials, IoT, data mining, environment, health, and social.That apart, GAIL India is unlikely to be
affected by potential supply outages and sanctions, despite Russia's Gazprom providing around 10% of its LNG consumption.According to market
participants, there's a potential opportunity for the Indian company to sell its LNG from the US in the European market, given that European
economies rely on Russian supply for about 57% of their gas needs.Last month, GAIL India pre-poned the supply of gas from the US and is
looking to contract more LNG next year as it doubles down efforts to secure affordable energy supplies to meet the needs of Asia's
third-largest economy.GAIL reported its higher quarterly net profit in three months to December 2021 as margins improved.Gas transmission
volumes increased 3.6% year on year (YoY) to 114.3 m standard cubic meters per day in third quarter
The company expects volumes to rise 5-6% every year for the next couple of years due to increase in supplies to city gas and fertiliser
plants.In the last couple of days, GAIL has witnessed heavy buying interest
Over the last 5 days, the stock is trading up by 18%.The bottom lineMr Market's mood has been very bleak as tensions between Russia and
Ukraine have intensified.Many investors have been horrified by the Russian military action
The war could push crude prices even further, hampering the country's economic recovery.But the oil and gas sector is seen as an attractive
sector for both day traders and long term investors.However, this sector entails a variety of substantial risks for market players
It tend to be more volatile than the broader market
It's sensitive to changes in the supply and demand of the underlying commodities.These firms are also subject to legal and regulatory risk
as a result of mishaps such as oil spills.As a result, investors need to be more careful when choosing oil stocks
Focus on firms that can withstand storms as they will be better positioned to succeed.Happy Investing!Disclaimer: This article is for
information purposes only
It is not a stock recommendation and should not be treated as such
This article is syndicated from Equitymaster.com(This story has not been edited by TheIndianSubcontinent staff and is auto-generated from a
