Indian Oil & Gas Sector- Financial Ratios
OIL & GAS SECTOR
RATIO ANALYSIS
CONTENTS
PARTICULARS PAGE No.
1. Introduction 3
2. Objective 5
3. Ratio Analysis 6
4. Appendix 8
INTRODUCTION
The Oil & Gas industry is the totality of all of the industries involved in the production and sale of fuel, including fuel extraction, manufacturing, refining and distribution. Modern society consumes large amounts of fuel, and the energy industry is a crucial part of the infrastructure and maintenance of society in almost all countries.
Oil and gas exploration and production (E&P) companies are unique from a valuation standpoint. Because of this, investors need to focus on a different subset of ratios to analyze the growth and profitability of these companies. Company revenues are important, but focus should be on netback. The netback is calculated by taking all of the revenues from the oil, less all costs associated with getting the oil to a market. These costs can include, but are not limited to, importing, transportation, production and refining costs, and royalty fees. Oil and gas stocks are broken down into three parts:
Upstream
Midstream
Downstream
An oil and gas company can contain anywhere from one to all three parts. Upstream refers to E&P. The second is midstream. It includes storing, transporting and marketing of oil, natural gas liquids and natural gas. The last is downstream, which is the refining of crude and the distribution of its byproducts.
There are more than 20 companies operating in this sector but in this phase of the report we have taken simple average of ratios of 6 different Oil & Gas companies in India to analyze the overall condition of this industry. These 6 companies are Essar India, Cairn India, Bharat Petroleum, ONGC, HPCL and GAIL.
Category
Ratio
Year II
Year I
Liquidity Ratios
Current Ratio
1.58
1.12
Quick Ratio
1.34
0.84
Absolute quick ratio
0.23
0.30
Activity Ratios
Debtors
RATIO ANALYSIS
CONTENTS
PARTICULARS PAGE No.
1. Introduction 3
2. Objective 5
3. Ratio Analysis 6
4. Appendix 8
INTRODUCTION
The Oil & Gas industry is the totality of all of the industries involved in the production and sale of fuel, including fuel extraction, manufacturing, refining and distribution. Modern society consumes large amounts of fuel, and the energy industry is a crucial part of the infrastructure and maintenance of society in almost all countries.
Oil and gas exploration and production (E&P) companies are unique from a valuation standpoint. Because of this, investors need to focus on a different subset of ratios to analyze the growth and profitability of these companies. Company revenues are important, but focus should be on netback. The netback is calculated by taking all of the revenues from the oil, less all costs associated with getting the oil to a market. These costs can include, but are not limited to, importing, transportation, production and refining costs, and royalty fees. Oil and gas stocks are broken down into three parts:
Upstream
Midstream
Downstream
An oil and gas company can contain anywhere from one to all three parts. Upstream refers to E&P. The second is midstream. It includes storing, transporting and marketing of oil, natural gas liquids and natural gas. The last is downstream, which is the refining of crude and the distribution of its byproducts.
There are more than 20 companies operating in this sector but in this phase of the report we have taken simple average of ratios of 6 different Oil & Gas companies in India to analyze the overall condition of this industry. These 6 companies are Essar India, Cairn India, Bharat Petroleum, ONGC, HPCL and GAIL.
Category
Ratio
Year II
Year I
Liquidity Ratios
Current Ratio
1.58
1.12
Quick Ratio
1.34
0.84
Absolute quick ratio
0.23
0.30
Activity Ratios
Debtors