High Inventory: APL to gain from raise in oil prices
News Report
Attock Petroleum Limited (APL) may be a major beneficiary of the rise in oil prices which is currently maintaining oil inventor levels for 30 days.
The government had increased oil prices up to Rs 5 per liter effective from September 16, 2021. APL maintained an average oil inventory level for 20 days in FY21 while currently, it is maintaining 30 days of inventory.
Attock Refinery Limited (ATRL) revealed in its annual general meeting that APL is currently maintaining inventory for 30 days. ATRL conducted its Annual General Meeting (AGM) on Wednesday to discuss FY21 financial results.
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During FY21, ATRL’s capacity utilization stood at around 79%. Attock Petroleum (APL) Management disclosed that 20% of gross profit was contributed by inventory gains during FY21. Thus, based on our estimates, the contribution of net inventory gain comes to around Rs14/share out of total EPS of Rs49.4.
The company also commissioned a mega bulk oil terminal at Port Qasim with a capacity of 39,500 tons (Capex of Rs2bn) in FY21 which will further strengthen the company’s market share and earnings going forward.
As per OCAC, APL’s retail fuel market share stood slightly over 7% in FY21. The management also disclosed that besides central and northern regions, it is focusing on the south region as well.
The management said that APL maintained an average inventory of 20 days in FY21 while currently, it is maintaining 30 days of inventory.
Interest to attend the meeting was to get an insight on refining policy which was approved but some reservations re-surfaced in the last Cabinet Committee on Energy (CCoE) meeting, Sherman Research said in a report.
The company is of the view that they are still waiting for the final policy. However, they have already done their in-house exercise regarding Euro-V specification fuel while project cost. They will reveal after the finalization of the policy.
The management disclosed that average gross refining margins (GRMs) stood at US$4.2 per barrel during FY21 which improved by 40% compared to last year.
The company also said that Naphtha remained a loss-making product on a net basis during FY21.
The management further added that furnace oil (FO) production is improving due to higher LNG prices leading to a revival of FO-based electricity generation.
Read More: Oil sales increased by 18% in the Financial year 2021
Moreover, the demand for FO by oil-based power units is likely to remain high in winters due to the diversion of gas from power plants to the domestic sector for heating purposes.
Considering higher LNG and coal prices, we believe that overall refining capacity utilization will improve in FY22, thanks to higher FO production.
