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Negative forex fluctuations arising out of 10% rupee depreciation during the first quarter of this fiscal has lead to Essar Oil reporting a net loss of Rs 863 crore.
Net loss has however, narrowed 43% as compared to the first quarter last fiscal when Essar Oil reported a net loss of Rs 1,518 crore. The company had reported net profit of Rs 200 crore during the fourth quarter of last fiscal.
“The quarter was marked by rupee volatility, which has impacted our profitability due to mark-to-market provisions. Due to prudent risk management policy followed by us, there are no cash losses," said Suresh Jain, CFO, Essar Oil.
A press statement from the company said it follows a very prudent risk management policy to hedge all its risks against currency fluctuations. As a result, the forex variations are mostly of mark-to-market nature, which is recoverable through sales or gross refining margin (GRM) in next quarters and hence have cash and earning neutral impact during the full financial year.
Essar Oil posted a 12% increase in revenue at Rs 24,721 crore against Rs 22,109 crore during in the correspoding previous quarter. The company's GRM for the quarter stood at $7 per barrel against $4.69 per barrel during April-June quarter of 2012.
For the quarter, the refinery processed 5.14 metric million tonnes (MMT) of crude, up 15% against the corresponding last quarter. The refinery continues to function at over its nameplate capacity of 20 MMTPA for the last four consecutive quarters with all units stabilized. During the quarter, the refinery operated at 103% of its capacity. Share of ultra heavy crude in refinery’s crude diet rose to 56% in the reporting quarter from 48% in the same period last year.
“The refinery has demonstrated excellent operating performance with a very strong focus on safety and has consistently outperformed the targeted benchmark IEA margins. Going forward, we are looking to further strengthen our retail business as the deregulation of diesel is eventually in sight based on regular increase in the retail prices," said LK Gupta, Managing Director and CEO, Essar Oil.
"We continue on our path to dollarize our debt and have converted rupee term loans into equivalent foreign currency debt of $340 million through ECBs /Swaps, taking our total dollarized debt to $821 million, in line with RBI approval. Besides providing interest saving, this also enhances our liquidity position,” Jain added.
Board appoints Prashant Ruia as Non-Executive Chairman
Essar Oil board today approved the appointment of Prashant Ruia as the Non Executive Chairman of the company, taking over from Shashi Ruia, who steps down. Prashant Ruia, 44, is also the Chairman of Essar Energy Plc, the parent company of Essar Oil.
Optima Plus Project
Essar Oil is undertaking a series of low capex and short gestation optimization projects across its refinery and marketing value chain under the banner of Optima Plus, which upon completion would provide a GRM uplift of about $1-1.5 per barrel over a period of next three years. These projects include setting up one more hydrogen manufacturing unit and a conversion of existing VGO into more valuable distillates.
Exploration & Production
At Essar Oil’s flagship Raniganj CBM block, current gas production is around 100,000 standard cubic metres per day (scm/d). The company has completed drilling 165 wells.
Stage III Environment Clearance for 618 wells has been received. Production is expected to reach 3 million scm/d by next year. "With the new gas price regime kicking in from April 1st, 2014, gas price is expected to be much better from current $4.2 /mmbtu.
"We see this as a welcome reform by the government which would boost investments in the exploration and production sector followed by ramp up in production, curb expensive imports, promote exploration and increase government revenues. This will also be positive for E&P companies as their profitability increases and also the new gas fields will become viable," statement from the company added.
