India's oil and gas companies are expected to post a solid earnings bounce in the third quarter of fiscal 2025‑26, driven by better refining margins and strong performance from Reliance Industries.
Overall sector outlook
Analysts estimate that total EBITDA for the oil and gas (O&G) sector could rise between 13% and 17% year‑on‑year in Q3 FY26. The boost comes mainly from refining and marketing firms, with some pressure on upstream producers.
Refining and marketing firms lead the surge
- Average oil prices fell about 10% YoY, keeping retail fuel demand steady.
- Higher product cracks (the spread between crude and refined products) are expected to push refining margins sharply up.
- Companies will also benefit from roughly ₹50 billion in LPG compensation.
- Singapore gasoline‑ready‑margin (GRM) improved to $4.9 per barrel from $4.0 in the previous quarter.
- One analyst projects a 68% YoY jump in EBITDA for major oil marketing companies (OMCs) thanks to strong GRMs and lower LPG under‑recoveries.
Reliance Industries shows solid growth
Reliance is forecast to increase its consolidated EBITDA by about 9% YoY. The rise comes from:
- Higher earnings from its Oil‑to‑Chemicals (O2C) business (+13% YoY).
- Improved Singapore GRM (+21% YoY) driven by better petrol and diesel spreads.
- Strong digital‑services revenue, partially offset by slower retail growth.
Upstream producers face headwinds
Lower crude oil prices are likely to trim earnings for upstream firms such as ONGC and Oil India. Estimates suggest:
- Quarter‑on‑quarter EBITDA could fall to ₹17,460 crore, an 8.2% decline.
- Year‑on‑year EBITDA may drop about 10% for ONGC and 2.7% for Oil India.
Gas companies present a mixed picture
- Indraprastha Gas (IGL) and Gujarat Gas (GGL) are expected to see EBITDA per scm rise about 7% YoY, helped by lower operating costs and softer LNG spot prices.
- Lower Gujarat VAT and a low base year also support IGL’s numbers.
- Mahanagar Gas (MGL) likely to post flat EBITDA per scm due to higher operating expenses.
- GAIL’s EBITDA may dip 7% YoY because of weaker petrochemical margins and lower LPG realizations.
- Petronet LNG’s EBITDA is projected to stay flat, with modest volume growth offset by higher costs.
Key takeaways for investors
- Refining and marketing firms are the primary drivers of sector earnings growth.
- Reliance’s diversified operations add a layer of resilience.
- Upstream producers could face short‑term earnings pressure.
- Gas utilities show varied results; watch cost trends and regulatory changes.
Remember, this analysis reflects current expectations and is not a prediction. Do your own research and consider consulting a certified financial advisor before making any investment decisions.