Oil India Ltd Q1 FY2023 Concall Summary

Key Takeaways

• Standalone PAT surged 206% YoY to ₹1,555 crore, powered by a 68% jump in crude realization to \$112.73/bbl and a tripling of gas prices to \$6.10/mmBtu.
• Production growth is tangible and on track: crude oil output rose 4.1% YoY and natural gas rose 8.4% YoY, with management reaffirming a steep ramp-up to 4.1 MMT of crude by FY25.
• Windfall tax is the new, unquantified overhang: the SAED took effect 1 July, so Q1 was clean, but management cannot estimate the quarterly hit given fortnightly rate resets and no disclosed government formula.
• A heavy provision quarter obscured underlying strength: ₹400 crore in provisions (well write-offs and a precautionary NELP block charge) and a ₹200 crore forex loss masked what would have been an even stronger operational print.
• What to watch next quarter: the actual SAED outflow and its net-realization impact, whether the ₹144 crore NELP provision reverses as expected, and any movement on the Assam royalty stay.

Production Growth & Targets

• Crude oil: Q1 output reached 0.08 crore metric tons, up 4.14% YoY, led by sustained gains at the Balimara and Lakwagaon fields which are expected to keep delivering.
• Natural gas: output hit 77.1 crore standard cubic meters, up 8.44% YoY, with the Baghjan field as the primary contributor.
• The ramp-up path: management targets 3.2 MMT of crude in FY23, stepping to 3.6 MMT in FY24 and 4.1 MMT in FY25; gas is set to reach ~3.2 BCM this year and 5 BCM by FY24–25, supported by infrastructure built to handle up to 7 BCM.
• Growth engine: the expansion will come from five identified thrust areas within existing fields and an acceleration of drilling activity, not from new frontier discoveries.
• Reserve life provides visibility: the reserve replacement ratio has been consistently above 1; crude reserves cover roughly 10 years of production and natural gas reserves cover more than 20 years.
• Exploration catalyst: 25 OLAP blocks have been acquired, seismic and exploration work is underway, and drilling to establish new reserves is planned for next year.

Windfall Tax (SAED)

• Timing: the additional excise duty on crude oil became effective 1 July 2022, so Q1 FY23 results (through 30 June) carry zero impact.
• Mechanics: the rate is set and reviewed fortnightly; it opened at ₹23,250/ton and was reduced to ₹17,500/ton at the first review. Management expects six revisions per quarter, making quarterly estimates impossible for now.
• Offset strategy: the company is paying Cess for the current month based on its own assessment, validated by tax consultants, that SAED and NCCD can be set off against Cess liability. Royalty, however, is a state subject and is not expected to be adjustable against the windfall tax.
• Net realization still healthy: even after the windfall tax, management observes net realization remains in excess of \$25/bbl, a level it describes as much higher than any past realization except the prior year.

Madhav: "We are not aware of any formula. This is the numbers which have been declared and there's no formula, which we are aware of. How this has been calculated that, of course, we don't know."

Provisions & One-Offs

• Total provisions of ₹400 crore weighed on the quarter, comprising a well write-off of roughly ₹270 crore (one Bangladesh well at ₹80 crore and two northeast wells) and a ₹144 crore provision for a NELP block where the production lease expired.
• NELP provision is precautionary: management took the charge as a matter of abundant precaution while an extension is expected in the next few months; if granted, the provision could reverse.
• Forex loss: a separate hit of about ₹200 crore was recorded in other expenditure, adding to the quarter's below-the-line noise.
• Baghjan liability: a Supreme Court-formed committee floated a figure of ₹1,200 crore, but management states the amount has mostly been covered and emphasizes the court has not passed any order based on that number.

Choudhuri: “These are just numbers, which are put up by individual. The court has got it in cognizance of these numbers or given any order based on this numbers. So, these are just numbers which are floating around basically.”

NRL Refining & Expansion

• GRM surge: NRL's core GRM (excluding excise duty benefit) jumped to \$36.66/bbl from \$5.21/bbl YoY, reflecting the strong global refining environment.
• Excise duty benefit: the May 2022 excise duty cut reduced the quarterly benefit for NRL from Q4 to Q1; management declined to disclose the GRM with excise duty, stating core GRM is the right comparison metric and the annual benefit runs roughly ₹2,000–2,400 crore.
• Expansion fully funded: NRL has tied up ~₹19,000 crore from a consortium of banks for its expansion project and had drawn ~₹1,350 crore by quarter-end.
• Timeline and equity call: the expansion is expected to be completed by end of 2025; Oil India's equity contribution is not expected this financial year and may come only next year after NRL exhausts its internal resources.

Madhav: "Both these GRMs, which we have quoted are excluding the excise duty benefit. This is the core GRM."

Gas Price & Regulatory Environment

• Price trajectory: the domestic gas price formula stands unchanged, and management expects the next revision to be implemented as worked out per that formula. With international prices feeding into it, the trend is rising and prices will be "certainly higher," though management declined to give a specific estimate.
• Royalty disputes: the company has obtained a stay from the Guwahati High Court against any coercive action by the Assam Government on royalty payments; a hearing on merit is pending. A similar matter is listed in the Rajasthan High Court but has not yet come up for hearing.
• Windfall tax philosophy: management frames the SAED as consistent with the practice across developing countries where super-normal profits on crude oil are not left entirely to national oil companies.

Choudhuri: “You see internationally, in developing countries, supernatural, super normal profits on crude oil is not allowed to the NOCs. This is not a thing, which is only prevalent in India. It is across developing countries.”

Guidance & Commitments

Key Metrics