Oil firms bear brunt

New Delhi: Upstream oil companies Cairn, ONGC and OIL India Ltd (OIL) are getting hit by the slide in the  price of crude oil which fell by 50 per cent in the last six months in the international markets. Even ONGC’s overseas arm OVL and Reliance’s foreign ventures’ revenues will be hit.

“Lower crude oil prices would materially impact profits of crude oil producers. The operating profit of Cairn India could decrease by around 35 per cent (YoY) for average crude oil price of $85 a barrel in FY15,” said rating agency ICRA.

It said that the adverse impact on ONGC and OIL would be limited to around 15 per cent on operating profits as their subsidy burden will go down with the fall in under-recovery levels. “We project the decline in under-recovery sharing discount to decline from $59 a barrel in FY14 to $40-45 per barrel in FY15,” said ICRA. It said that the cash generation of overseas ventures of ONGC Videsh, OIL and Reliance Industries Ltd (RIL) would decrease significantly.

However for the consuming segments, industries including paint, FMCG and tyres could be the major gainers due to fall in the prices of raw materials. Meanwhile, brent crude oil recovered slightly after falling below $50 a barrel on Wednesday. Brent crude futures rose 10 cents to $51.20 by 13:14 GMT, having fallen as low as $49.66, a level last seen in May 2009.