Bharat Petroleum Corporation Ltd. - ZENMoney

Company Profile: Bharat Petroleum Corporation Ltd. (BPCL) - formerly Bharat Refineries Ltd was the erstwhile Burmah Shell Refineries Ltd. It was incorporated in 1952 and in 1976 the company was taken over by the Government of India to form Bharat Refineries Ltd. Strategic Business Units (SBUs) of the company are refineries, retail, industrial & commercial, lubricants, LPG and Aviation. BPCL has four refineries namely, Mumbai Refinery (12 MMTPA), Kochi Refinery (9.5 MMTPA), Numaligarh Refinery (3 MMTPA, BPCL has 61.65% stake) and Bina Refinery (6 MMTPA majority owned by BPCL). Company formally entered into Exploration & Production (E&P) segment in 2006 through the incorporation of its wholly owned subsidiary Bharat PetroResources Limited (BPRL). BPRL has interests in 25 exploration blocks in Brazil, Mozambique, Australia, East Timor, Indonesia and India. BPCL also has formed many joint ventures and some of them are Petronet LNG, Indraprastha Gas and Sabarmati Gas, etc.

Strengths:

- BPCL is an integrated Oil & Gas company with a refining capacity of 30.5 MMTPA and 11,637 retail outlets (as of 31st March. 2013). This strength is further enhanced by the strong brand equity enjoyed by the company.

- BPRL has 10% stake in Rovuma/Offshore Area 1 Gas Block in Mozambique. Anadarko, the operator of this field estimates the block to have 30 to 60 trillion cubic feet of recoverable natural gas resources.

- BPCL holds 12.5% stake in Petronet LNG and 22.5% stake in Indraprastha Gas Ltd.

Concerns:

- Any steep increase in International oil prices can increase the under-recoveries for the company.

- As of 31st March 2013, the company had short terms borrowings of Rs. 20158.20 crore.

Outlook: BPCL stands out from the pack of the three big Oil Marketing Companies (OMCs) because of its strong presence in the E&P space. Its E&P subsidiary BPRL has had a total of 17 discoveries (8 in Mozambique, 6 in Brazil and 1 each in India, Indonesia and Australia). These valuable E&P assets along with the planned capacity expansion at Kochi Refinery by 5.5 MMTPA and a 500 TMTPA Petrochemical Fluid Catalytic Cracker will significantly add to the company's top-line and help in improving its margins in the coming few years. Finally, a possible improvement in financial position of the company by virtue of ongoing de-regulation in oil & gas sector and estimated valuations for oil and gas block finds in Mozambique & Brazil provide the investor with safety in terms of valuations.

Source : Equity Bulls

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