State-run Hindustan Petroleum Corporation (HPCL) reported a 43% year-on-year drop in consolidated net profit to Rs 1,253 crore for the December quarter, as crude oil price fluctuation that hovers to around seven-year high levels led to inventory losses for the refiner. The profit was also impacted by delay in refinery expansion at Mumbai due to the second wave of Covid and extended monsoon.
HPCL reported a net profit of Rs 868.9 crore on a standalone basis, recording a 63% drop from the same period a year ago. While revenue grew 32.8% year-on-year (y-o-y) in Q3FY22 to Rs 1.03 lakh crore, expenses — comprising mostly of crude oil purchase — increased by a sharper 36.9% to Rs 1.02 lakh crore.
The price of the Indian basket of crude in the international market fluctuated between $70 per barrel and $85 per barrel in the quarter. As retail prices of petroleum products are mapped with international rates, a gradual rise of global oil prices in Q3FY22 meant that by the time HPCL sold its products after processing crude, retail rates had decreased. Prices of petrol charged to dealers by state-run oil marketing companies, including HPCL, have remained unchanged since November 4, 2021 even as the price of the Indian basket of crude fell from the level of $83.7/barrel on November 2 to $69.8/barrel on December 20 and increased again to $77.1/barrel on December 31 and $88.8/barrel by January 27.
The extended shutdown of some of the units at the Mumbai refinery due to expansion activities affected the oil refiner to make full use of the elevated gross refining margins (GRMs) in the December quarter. GRMs in Q3FY22 jumped to $6.39 per barrel, compared with $1.87 per barrel a year ago on the back of increased demand for petroleum products.
Mukesh Surana, chairman & managing director of HPCL, told reporters in a conference call, “The company is hopeful of getting the positive impact of refinery throughput at Mumbai from the January-March quarter of 2022, as all the units have fully stabilised and operating to the 100% design capacity, that is 9.5 million tonnes per annum.”
HPCL’s total income for the October-December period of 2021 rose by a third or 32.73% on year to Rs 103,967 crore, on the back of increased demand. The overall demand of petroleum products for the nine-month period of April-December 2021 was 97% of the prepandemic demand in April-December of 2019, Surana said.
During April-December 2021, the domestic sales of petroleum products rose 7% y-o-y to 27.2 million tonne per annum (mtpa). The sale of motor spirit increased by 14.6% y-o-y, high-speed diesel by 7.1% y-o-y and LPG by 2.9% y-o-y.
In the December quarter of 2021, HPCL refineries processed 4.24 mtpa of crude as compared to 4.0 mtpa a year ago. The gross refining margins for the nine-month period April–December 2021 was $4.50/bbl, against $2.35/bbl a year ago.