Oil India Ltd Q1 FY2024 Concall Summary

Key Takeaways

• Production growth intact despite a messy quarter: Crude oil production grew ~5% QoQ, and management reaffirmed its 2–3% annual growth guidance for both oil and gas, expecting to surpass it.
• Gas offtake, not the reservoir, was the problem: Natural gas production fell because three major customers (NRL, BBSPL, BCPL) took simultaneous scheduled maintenance shutdowns, a one-off coincidence that has already normalized.
• Refining shutdown crushed consolidated profit: NRL was down for 75 days, swinging from a INR1,407 Cr profit to a INR77.6 Cr loss and driving a 56.7% drop in consolidated PAT. The refinery is back at 100% utilization and may run above capacity in Q2 to recoup lost throughput.
• Lower provisions flattered the standalone margin: EBITDA margin jumped to 53.5% from 44.8%, but the move was driven largely by a ~INR200 Cr reduction in exploratory well write-offs and lower forex losses, not an underlying structural shift.
• What to watch next quarter: Whether NRL can sustain above-100% utilization to claw back Q1 throughput, the pace of gas production recovery now that offtake has normalized, and any clarity from the Guwahati High Court on the GST-on-royalty provision.

Production & Offtake: The Operational Story

• Crude oil delivered: Production grew ~5% QoQ, putting the company ahead of its annual 2–3% growth guidance. Management explicitly expects to surpass that target.
• Gas production fell on customer downtime, not well performance: Numaligarh refinery was shut for maintenance nearly the full quarter and then suffered a fire incident; BBSPL and BCPL also entered scheduled shutdowns that coincided. The result was lower offtake, not a reservoir problem, and all three plants resumed operations by late June/early July.
• JV contribution is negligible: JV crude oil is 0.002 out of 0.08 crore tonnes and JV gas is 12 out of 745 MMSCM, so effectively 100% of production is OIL India standalone.
• Pipeline revenue took a direct hit: The Numaligarh-to-Siliguri product pipeline saw minimal throughput during the NRL shutdown, and crude transportation was also affected. Both streams are now back to normal with the refinery running.
• The Indradhanush Gas Grid unlocks future gas growth: Once fully commissioned, the Northeast gas grid will absorb OIL's production and remove the offtake constraint that has historically capped output. The first leg is expected to be commissioned by end-December of the current year.

Harish Madhav: "We maintain that, and most likely, we'll be surpassing that the guidance, which we have already given. The first quarter crude production has grown more than 5%. Natural gas... 4% to 5% growth is not at all questionable, we will certainly be achieving that."

NRL Shutdown: The Consolidated Profit Drag

• A 75-day outage swung NRL from profit to loss: The refinery posted a loss of INR77.56 Cr versus a profit of INR1,407 Cr in Q1 FY23, the single largest driver of the 56.7% decline in consolidated PAT.
• Oil sales fell as NRL, the anchor customer, went offline: The sales decline was partially offset by higher offtake from IOC refineries in Guwahati and Bongaigaon, and closing stock increased accordingly. Management expects sales to normalize in coming quarters now that NRL is back at full operations.
• NRL restarted in the last week of June and is already at 100% utilization: Within a week of restart, the refinery moved from the CDU to supplementary units and is now running absolutely normal. Q2 utilization is targeted at 100%, with an effort to run above that level to recoup Q1 throughput loss.
• NRL expansion cost is holding steady: The approved project cost remains INR28,000 Cr with no escalation. Completion is expected by end of 2025, with the refinery on stream by March 2026.
• Restart cost was minimal: The exceptional cost booked for the NRL restart was INR7 Cr.

Harish Madhav: "Q2 refinery will be fully utilized, yes, 100% utilized. In fact, we may be trying to recover something more than 100% because to recoup the throughput loss in the first quarter."

Margin Walk: Provisions, Not Operations

• Standalone EBITDA margin rose sharply to 53.5% from 44.8%: The 19.5% increase was driven by a steep drop in other expenditure, not by an improvement in underlying operating economics.
• The other-expenditure decline has three components: A ~INR200 Cr reduction in provision for exploratory well write-offs, a ~INR160 Cr reduction in other provisions, and a INR229 Cr reduction in foreign exchange loss. Insurance costs did not decline; the forex loss component that is clubbed into other expenses did.
• One specific line item swung on a one-time base effect: The "other" expenditure line fell from INR205 Cr to INR68 Cr YoY because Q1 last year included a ~INR140 Cr provision for minimum work program liabilities in the Mizoram NELP project, with no such provision in the current quarter.
• The run-rate question was deflected: When asked whether the INR68 Cr "other expenditure" figure is sustainable going forward, management initially declined to answer and later explained the YoY decline but did not address the forward run-rate.

Balance Sheet & Contingent Liabilities

• Baghjan: no provision, no deposit, no timeline: The NGT constituted a new committee to review and estimate restoration work and asked the company to deposit INR200 Cr in a separate account. Management informed the committee the money is available with the company instead, and the committee agreed. No provision has been booked; actual costs will be booked when incurred per the committee's recommendations, possibly over 2–3 years.
• GST on royalty: a decision is expected this year, but it depends on a court hearing: The matter is pending before the Guwahati High Court, and management is waiting for a hearing on merit before taking a view. A decision is expected during the current financial year.
• Russian dividends are flowing from pre-2022 funds only: The dividend booked this quarter came from OIL's Singapore subsidiary, using funds that had already been migrated there from pre-February/March 2022 Russian dividends. Management did not address whether any breakthrough has occurred for post-February 2022 dividends trapped in Russia.

Harish Madhav: "There's absolutely no provision. It was just an interim order, which says... the company should deposit INR200 crores, keeps INR200 crores in a separate account. No provision has been made, no separate money deposit has been done."

Mozambique & Other Projects

• Mozambique restart is operator-driven and targeted for late 2023: The operator plans to restart the project around October/November. Cost escalation work is ongoing, with final numbers expected in about two months.
• NRL rights issue is progressing: OIL India has allotted its share of funds. The Assam Government has taken capital approval and actual investment is expected shortly. EIL is in the process of obtaining ministry approval and is expected to invest within a month or so.
• The 5 BCM gas production target holds: Management confirmed it is still holding to the FY25–26 timeline for the 5 BCM target, and all other production targets remain in place.

Harish Madhav: "Currently, as informed by the operator, they are going to restart the project by end of this year, maybe around October, November."

Guidance & Commitments

Key Metrics