Oil India Ltd:Annual Report 2023-24 Analysis

Oil India Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Oil India Limited (OIL) was established in 1959 as a department under the Ministry of Petroleum and Natural Gas. In 1981, it was incorporated as a limited company. Its genesis lies in the discovery of crude oil in Nahorkatiya, Assam, in 1953, leading to the need for a dedicated entity to explore and develop India’s hydrocarbon resources.

Headquarters Location and Global Presence:

• Headquarters: Duliajan, Assam, India.
• Global Presence: While primarily focused on domestic operations, OIL has expanded its international footprint through exploration and production activities in countries like Libya, Iran, Nigeria, Sudan, and the USA, often through strategic partnerships.

Company Vision and Mission:

• Vision: To be a premier integrated energy company with global presence, committed to excellence, sustainable development, and creating value for stakeholders.
• Mission:
  • To explore, develop, and produce oil and natural gas efficiently and sustainably.
  • To create value for stakeholders through profitable growth and diversification.
  • To contribute to the energy security of India.
  • To be a responsible corporate citizen committed to environmental protection and social development.

Key Milestones in Their Growth Journey:

• 1959: Established as a department under the Ministry of Petroleum and Natural Gas.
• 1981: Incorporated as a limited company.
• 2009: Granted Navratna status by the Indian Government.
• 2010: Successful Initial Public Offering (IPO).
• Continuous expansion of exploration and production activities in India and abroad.

Stock Exchange Listing Details and Market Capitalization:

• Stock Exchange Listing: National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE).
• Market Capitalization: Market capitalization fluctuates; refer to current financial data sources for up-to-date information.

Recent Financial Performance Highlights:

Refer to recent annual reports, quarterly results announcements, and financial news sources for the most current financial data, including revenue, profit, production volumes, and key financial ratios.

Management Team and Leadership Structure:

OIL is led by a Chairman & Managing Director and a Board of Directors comprising functional directors and independent directors. Refer to the company’s official website for the latest information on the management team.

Notable Awards or Recognitions:

OIL has received various awards and recognitions for its performance, safety, environmental practices, and CSR initiatives. Refer to the company’s website or press releases for details.

Their Products #

Complete Product Portfolio with Categories:

• Crude Oil: The primary product, extracted from onshore and offshore fields.
• Natural Gas: Produced alongside crude oil and as a standalone resource.
• Liquefied Petroleum Gas (LPG): Extracted from natural gas.

Flagship or Signature Product Lines:

Crude Oil is the core product, driving the company’s revenue. Natural gas is also a significant contributor.

Manufacturing Facilities and Production Capacity:

OIL operates several oil and gas fields and processing facilities primarily in Assam and Rajasthan, with expanding operations in other parts of India. Production capacities vary; refer to annual reports for the latest figures.

Quality Certifications and Standards:

OIL adheres to relevant quality certifications and standards applicable to the oil and gas industry.

Primary Customers #

Target Industries and Sectors:

• Refineries: Supplying crude oil as feedstock for the production of refined petroleum products.
• Power Plants: Providing natural gas for power generation.
• Fertilizer Plants: Supplying natural gas as feedstock for fertilizer production.
• Other Industries: Supplying natural gas for various industrial applications.

Geographic Markets (Domestic vs. International):

The primary market is domestic, with crude oil and natural gas supplied to Indian refineries and industries. International operations contribute to overall production, but the majority of sales are within India.

Major Client Segments:

• Public sector refineries (e.g., Indian Oil Corporation, Bharat Petroleum, Hindustan Petroleum)
• Private sector refineries
• Power generating companies
• Fertilizer manufacturers

Major Competitors #

Direct Competitors in India and Globally:

• Direct Competitors in India:
  • ONGC (Oil and Natural Gas Corporation)
  • Private players in the E&P sector like Vedanta Resources
• Global Competitors: International oil and gas companies with operations in similar regions.

How They Differentiate From Competitors:

OIL differentiates itself through its specific focus on certain geographical areas (particularly Northeast India), its expertise in exploration and production in challenging terrains, and its long history as a national oil company.

Industry Challenges and Opportunities:

• Challenges:
  • Fluctuations in global oil prices
  • Geopolitical risks affecting international operations
  • Environmental regulations and the need for sustainable practices
  • Competition from renewable energy sources
  • Difficult exploration and production conditions in certain regions.
• Opportunities:
  • Growing energy demand in India
  • Government initiatives to promote domestic oil and gas exploration
  • Technological advancements in E&P
  • Diversification into renewable energy sources.

Future Outlook #

Expansion Plans or Growth Strategy:

• Expanding exploration and production activities both domestically and internationally.
• Focusing on enhanced oil recovery (EOR) techniques to increase production from existing fields.
• Diversifying into renewable energy sources.

Sustainability Initiatives or ESG Commitments:

OIL is increasingly focusing on sustainability initiatives, including reducing its carbon footprint, investing in renewable energy, and implementing responsible environmental practices.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from operations showed variability: ₹23,259.61 crore (FY 2022-23), ₹14,530.18 crore (FY 2021-22), and ₹22,129.79 crore (FY 2023-24, Standalone).
• Profit After Tax (PAT) was ₹6,810.40 crore (FY 2022-23), ₹3,887.31 crore (FY 2021-22), and ₹5,551.85 crore (FY 2023-24, Standalone).
• EBITDA margin was 45.14% (FY 2022-23), 44.23% (FY 2021-22), and 47.50% (FY 2023-24, Standalone).
• Net profit margin was 27.51% (FY 2022-23), 23.66% (FY 2021-22) and 25.09%,(FY 2023-2024, Standalone).
• Capital expenditure experienced volatility : ₹5,534.42 crore (FY 2022-23), ₹4,366.52 crore (FY 2021-22) and ₹5,906.92 (FY 2023-24, Standalone).
• Earnings Per Share (EPS) were ₹62.80 (FY 2022-23), ₹35.85 (FY 2021-22), and ₹51.20 (FY 2023-24, Standalone).
• Debt to Equity ratio was 0.32 (FY 2022-23),0.39(FY2021-22) and 0.26 (FY 2023-24, Standalone).

Business Segment Performance #

• Crude Oil segment revenue decreased marginally due to a decrease in crude oil price, despite a 5.76% increase in production in FY 2023-24.
• Natural Gas segment revenue declined due to a decrease in natural gas prices, despite a marginal increase in production.
• LPG segment revenue decreased from ₹210.14 crore in FY 2022-23 to ₹170.40 crore in FY 2023-24.
• Pipeline Operations revenue decreased to ₹533.66 crore in FY 2023-24 from ₹649.85 crore in the previous year.
• Renewable Energy segment revenue decreased to ₹112.30 crore during FY 2023-24.

Major Strategic Initiatives and Their Progress #

• OIL is intensifying E&P activities, focusing on enhanced recovery techniques and accelerated drilling.
• Progress is being made in offshore exploration, particularly in the Andaman and Kerala Konkan basins.
• The company is investing in infrastructure development projects, including pipelines and gathering stations.
• A joint venture agreement was executed with Assam Power Generation Corporation Limited to develop green energy infrastructure.
• Numaligarh Refinery Expansion Project (NREP) is in progress to increase crude processing capacity.
• A subsidiary (Oil India Green Energy Ltd.) was created to expand the company’s presence in the green energy sector.

Risk Landscape Changes #

• The company faces increasing pressure to transition to renewable energy sources.
• Volatility in global oil prices and geopolitical tensions remain significant risks.
• Cybersecurity threats have become more prominent with increased digitalization.
• Operational risk are subject to HSE risks.

ESG Initiatives and Metrics #

• The company is committed to achieving Net Zero Emissions by 2040.
• Reduction in natural gas flaring through commissioning of pipelines such as Kumchai to Kusijan and others, contributing to environmental sustainability.
• Investments are directed towards renewable energy, biofuels, compressed biogas, green hydrogen, and CCUS.
• CSR initiatives focus on healthcare, education, skill development, and environmental sustainability, with an expenditure of ₹122.80 crore in FY 2023-24.

Management Outlook #

• The company’s strategies include consolidating its position in Northeast India and expanding in Rajasthan, Mahanadi Basin, and offshore areas.
• Focus on increasing the portfolio of non-fossil fuel-based energy sources and achieving Net Zero by 2040.
• Continued investment in technology and innovation to mitigate exploration risks and improve flow assurance.

Detailed Analysis #

Financial Position: Balance Sheet Analysis #

3-Year Comparative Analysis (Consolidated) #

(₹ in crore)

Significant Changes in Major Line Items (>10% YoY) #

• Refinery Products Assets: Increased by 53.08% (₹9,601.65 crore) from 2022-23 to 2023-24.
• **Unallocated Assets:**Increased by 18.61%(6,638.39 crore) from 2022-23 to 2023-24.
• **Total Assets:**Increased by 24.72%( 18,269.84 crore) from 2022-23 to 2023-24.
• Refinery Products Liabilities: Increased by 20.41% (₹780.43 crore) from 2022-23 to 2023-24.
• **Unallocated liabilities:**Increased by 25.39%(5,831.9 crore) from 2022-23 to 2023-24.
• Total Liabilities: Increased by 23.38%(7,496.74 crore) from 2022-23 to 2023-24.
• **Total Equity:**Increased by 25.74%(10,773.1 crore) from 2022-23 to 2023-24.
• Renewable Energy Assets: Decreased by 14.75% (77.48 crore) from 2022-23 to 2023-24.

Working Capital Trends #

(₹ in crore)

• Working capital decreased significantly.

Debt Structure and Maturity Profile #

(₹ in crore)

• Detailed maturity profiles are presented within the financial statements (Notes 48.8.1.1 and 48.8.1.2), showing amounts due in various future periods (up to 1 year, 2nd year, 3rd year, 4-5 years, after 5 years).

Off-Balance Sheet Items #

(₹ in crore)

Analysis Summary #

• The data illustrates significant growth in both assets, liabilities, and equity.
• The data, while presenting details, it limits some year-to-year comparison analysis, and lacks context to some of the financial statement items.
• Working capital experienced a major reduction, which requires further investigation as to cause.
• Debt levels increased significantly.
• Substantial off-balance sheet items exist, mainly commitments and contingent liabilities related to ongoing litigations and operational agreements.

Operating Performance Analysis #

Revenue Breakdown by Segment and Growth Rates #

• Crude Oil: Revenue decreased to ₹16,123.45 crore in FY2023-24 from ₹16,787.79 crore in FY2022-23, a decline of 3.96%.
• Natural Gas: Revenue decreased to ₹5,189.98 crore in FY2023-24 from ₹5,489.87 crore in FY2022-23, a decline of 5.46%.
• LPG: Revenue was to ₹170.40 crore in FY2023-24 from ₹210.14 crore in FY2022-23, a decline of 18.91%.
• Pipeline Transportation: Revenue decreased to ₹533.66 crore in FY2023-24 from ₹649.85 crore in FY2022-23, a decline of 17.88%.
• Renewable Energy: Revenue decreased to ₹112.30 crore in FY2023-24 from ₹121.96 crore in FY2022-23, a decline of 7.92%.
• Total Revenue (Standalone): Decreased by 0.98%, from ₹24,757.85 crore in FY2022-23 to ₹24,514.28 crore in FY2023-24.
• Total Revenue (Consolidated): Decreased by 12.25% from ₹41,758.29 crore to ₹37,646.48 crore.

Cost Structure Analysis #

• Statutory Levies: ₹5,481.53 crore in FY2023-24, a marginal decrease of 3.43% year-on-year.
• Contract Cost: ₹1,561.61 crore, a slight decrease of 0.17%.
• Employee Benefit Expense: Decreased by 9.35%, from ₹1994 crore to ₹1808.96 crore.

Margin Analysis (Consolidated) #

• Operating Profit Margin: Decreased from 34.75% in FY2022-23 to 33.82% in FY2023-24.
• Net Profit Margin: Decreased from 27.51% in FY2022-23 to 22.65% in FY2023-24.
• Standalone PAT Margin: 25.09% with a PAT of ₹5551.85 crore.

Non-Recurring Items #

• An exceptional item of ₹2,362.72 crore (standalone) and ₹2,365.56 crore (consolidated) was reported in FY2023-24 relating to disputed Service Tax/GST liability on royalty.

EPS Analysis (Basic/Diluted) #

• Basic & Diluted EPS (Continuing Operations - Standalone): Decreased from ₹62.80 in FY2022-23 to ₹51.20 in FY2023-24.
• Basic & Diluted EPS (Consolidated): ₹58.42.

Oil India Limited Financial Analysis: Key Insights from FY 2023-24 #

Cash Flow and Liquidity Analysis #

Operating Cash Flow (OCF) #

• FY 2023-24: Increased to ₹10,933.14 Cr from ₹11,410.41 Cr in FY 2022-23.
• FY 2023-24 OCF driven by Profit Before Tax (PBT) of ₹8,845.91 Cr, with non-cash adjustments: depreciation, depletion, and amortization (₹2,128.98 Cr), exploration costs written off (₹11.84 Cr), and impairment of assets (₹656.20 Cr).
• FY 2023-24 Working capital changes decreased cash from operation by ₹677.80 Cr, and income tax payments amounted to ₹1914.23 Cr.

Investing Cash Flow (ICF) #

• FY 2023-24: Net cash used in investing activities was ₹(12,601.21) Cr, significantly up from ₹(9131.43) Cr in FY 2022-23.
• Major uses include Acquisition, Exploration & Development Cost and capital expenditure, partly offset by interest and dividend income.

Financing Cash Flow (FCF) #

• FY 2023-24: Net cash from financing activities was ₹1637.22 Cr, down from ₹(4,220.14) Cr in FY 2022-23.
• Includes proceeds from borrowings and repayment of borrowings, along with dividend payments and interest expenses.

Working Capital Management Efficiency #

• The current ratio decreased from 1.94 in FY 2022-23 to 1.01 in FY 2023-24, indicating a reduction in short-term liquidity.
• Inventory turnover decreased from 18.74 times in FY 2022-23 to 15.05 times in FY 2023-24.
• Debtor turnover decreased from 12.67 times in FY 2022-23 to 9.1 times in FY 2023-24.

Capex Analysis by Segment (₹ in Crores) #

Dividend and Share Buyback Trends #

• Dividend per share (pre-bonus): ₹15.75 for FY 2023-24, and ₹20.00 FY 2022-23.
• Dividend payout ratio decreased from 31.85% in FY 2022-23 to 30.76% in FY 2023-24.
• A bonus share issue was declared in FY 2024 (1:2 ratio), increasing the issued, subscribed, and paid-up share capital.

Debt Service Coverage #

• The debt service coverage ratio increased from 3.78 to 7.85.

Liquidity Position and Cash Conversion Cycle #

• Cash and cash equivalents decreased from ₹340.62 Cr at the beginning of FY 2023-24 to ₹315.99 Cr at the end.
• Other bank balances (including term deposits) were significantly higher at ₹5,621.32 Cr compared to ₹3,118.66 Cr in the previous year.

Oil India Limited (OIL) Financial Analysis: Key Metrics #

Profitability Ratios (3-Year Trends) #

• ROE, ROA, and Net Profit Margin show a decreasing trend from 2022-23 to 2023-24.
• Operating Profit Margin remained relatively stable over the last three Financial Years.
• ROIC shows a significant decrease between FY 2022-23 and FY 2023-24.

Liquidity Metrics #

• Current and Quick Ratios decreased from 2022-23 to 2023-24, but the Current Ratio remained at a healthy level.

Efficiency Ratios #

• All efficiency ratios decreased between FY 2022-23 and FY 2023-24.

Leverage Metrics #

• Debt/Equity Ratio decreased from FY 2022-23 to FY 2023-24.
• Interest Coverage Ratio shows a decline from FY 2022-23 to FY 2023-24

Working Capital Ratios #

• The working capital indicator of OIL has decreased significantly from FY 2022-23 to FY 2023-24.
• The provided consolidated data for DNP Limited, Assam Petro-Chemicals Limited, and Indradhanush Gas Grid Limited show negative equity, while the working capital is still positive.

Oil India Limited (OIL) FY 2023-24 Business Segment Analysis #

Revenue and Profitability #

• Crude Oil: Revenue decreased to ₹16,123.45 crore, despite a 5.76% production increase, due to a decrease in crude oil price realization.
• Natural Gas: Revenue declined to ₹5,189.98 crore, though production was the highest ever achieved since inception.
• LPG: Revenue decreased to ₹170.40 crore.
• Pipeline Transportation: Revenue decreased to ₹533.66 crore.
• Renewable Energy: Revenue decreased to ₹112.30 crore due to plant revamp, with the expectation of improved future performance.
• Consolidated Operational Revenue: Decreased from ₹41,025.98 crore to ₹36,303.62.
• Consolidated Group PAT: Registered at ₹6,980.45 crore (₹9,854.39 crore in the previous year).
• Standalone Company PAT: Registered at ₹5,551.85 crore (₹6,810.40 crore in the previous year).
• Consolidated Net Profit Margin: Stood at 19.23%.
• Standalone Net Profit Margin: 25.09%.

Market Share and Competitive Position #

• OIL aims to consolidate its position as a leading operator in Northeast India and expand in Rajasthan, Mahanadi Basin, and offshore areas.

Key Products/Services Performance #

• Crude Oil: Production increased by 5.76% over the previous year, reaching 3.359 MMT.
• Natural Gas: Production reached 3182 MMSCM, the highest ever achieved since inception.
• LPG: The plant processed an average of 1.83 MMSCMD of gas. Bottling operations were closed down, and all LPG produced is now dispensed in bulk.
• Pipeline: Crude oil pipeline transported 6.74 MMT of crude oil. The Numaligarh-Siliguri Product Pipeline had a utilization of 67.05%.

Geographic Distribution and Market Penetration #

• Domestic operations are spread across Assam, Arunachal Pradesh, Mizoram, Tripura, Nagaland, Odisha, Andhra Pradesh & Rajasthan, and offshore areas in Andaman, Kerala-Konkan & KG shallow waters.
• Holds Participating Interest in 4 NELP Blocks.
• Expanded acreage through acquisition of one block in Assam during OALP Bid Round-VIII.
• Total domestic operating acreages: 58,564.2 Sq. KM.
• Overseas assets in Russia, Venezuela & Mozambique.

Segment-wise CAPEX #

• Total Capex (Group Level): ₹14,675.72 crore.
• Numaligarh Refinery Limited (NRL) Capex: ₹8,501.90 crore.
  • OIL’s Proportionate Share in JVs & Associates Capex = ₹1307.35 crore
• Rajasthan Field: Plans to install 1 MW Solar Power Plant.

Operational Efficiency #

• LPG Recovery Plant: Availability was 99.52%, with butane recovery efficiency at 98.87%.
• Numaligarh Refinery Limited: Processed 2,510 TMT of crude oil, operating at 108% of design capacity in the third and fourth quarters.
  • Digboi-Naharkatia-Bongaigaon Crude Pipeline: 3.25 MMT transported for OIL,1.03 MMT for ONGC.
  • Barauni-Bongaigaon: 2.42 MMT of imported crude oil was transported.
• Reserve Replacement Ratio(RRR): Achieved 0.97 under 2P category during the year.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Focus on increasing renewable energy capacity to 5 GW by 2040.
  • Joint Venture with Assam Power Generation Corporation Limited for green energy infrastructure.
  • Reduction of gas flaring through new pipelines.
  • Biofuel sector initiatives, including a 2G Bio Ethanol plant.
  • Planned production of 20 KTPA of Green Hydrogen through NRL.
  • Expansion in City Gas Distribution (CGD) sector.
  • Establishing OIL India Green Energy Ltd.
  • Investment in R&D for innovative solutions in exploration, production, and flow assurance.
  • Startup nurturing program (SNEH) to support innovation.
• Challenges:
  • Need for innovative solutions to tackle exploration risks, limitations of geophysical methods in tough terrains, declining production from old fields, and flow assurance.
  • Mitigating opportunity losses in crude oil and natural gas production due to external factors (protests, local issues).
  • Managing the fall of crude oil and natural gas prices in FY 2023-24.
  • Decline in power generation due to the revamping of renewable energy plants.

Risk Framework #

Strategic Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies:
  • Redesigning a new vision to be a leading and future-ready integrated energy company.
  • Increasing the portfolio of non-fossil fuel-based energy sources.
  • Investing 25,000 crore in the next few years.
  • Executed a Joint Venture Agreement with Assam Power Generation Corporation Limited.
• Control Effectiveness: Moderate
• Potential Financial Impact: Significant. Investments in renewable energy of ~14,675.72 crores at group level were made during FY 2023-24.

Operational Risks #

• Severity: Moderate to High
• Likelihood: Moderate
• Trend: Stable
• Mitigation Strategies: Adoption of IOR/EOR techniques, quick monetization of new discoveries, production optimization, induction of new technology, and upgrades of surface facilities.
• Control Effectiveness: Moderate
• Potential Financial Impact: Moderate

Financial Risks #

• Severity: Moderate
• Likelihood: High
• Trend: Fluctuating
• Mitigation Strategies: The document does not specify financial risk mitigation strategies, such as hedging.
• Control Effectiveness: Low
• Potential Financial Impact: High

Compliance/Regulatory Risks #

• Severity: High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Legal opinions sought and writ petitions filed in various High Courts, challenging the applicability of disputed tax.
• Control Effectiveness: Low
• Potential Financial Impact: High, as evidenced by the large provision made (’ 3,079.33 crore) during FY 2023-24.

Emerging Risks #

• Severity: Moderate to High
• Likelihood: High
• Trend: Increasing
• Mitigation Strategies: Commitment to deploy about 5 GW of renewable energy capacity by 2040, investments in biofuels, green hydrogen, and carbon capture.
• Control Effectiveness: Moderate
• Potential Financial Impact: High

Strategic and Management Analysis #

Long-Term Strategic Goals and Progress #

• The Company aims to become a fully integrated energy entity, aligning with the global shift towards cleaner energy sources, with a Net Zero target by 2040.
• “Mission 4+” was initiated to enhance the Company’s production levels through fast-track development of fields and accelerated drilling, including in complex geological formations.
• The Company aims to increase its production by using IOR/EOR techniques, monetizing new discoveries, production optimization, using new technology, and improving the infrastructure.
• The Company has acquired one block in Assam, increasing total domestic operating acreages to 58,564.2 Sq. KM as of March 31, 2024.
• The company is planning to invest ’ 25,000 crores in low-carbon initiatives by 2040.

Competitive Advantages and Market Positioning #

• The Company is consolidating its position as a leading operator in Northeast India and expanding in Rajasthan, Mahanadi Basin, and offshore areas.
• The Company is leveraging its strong oil and gas reserves base in domestic assets, including joint ventures.
• Achieved a Reserve Replacement Ratio (RRR) of 0.97 under the 2P category.
• The Company has secured high credit ratings, with domestic ratings at the highest level from CRISIL and CARE.
• The company acquired majority stake of Numaligarh Re/fi.liganery limited making itself a fully intergrated energy company.
• Numaligarh Re/fi.liganery Limited, a material subsidiary, contributed signi/fi.ligacantly to the Company’s performance.

Innovation Initiatives and R&D Effectiveness #

• The Company is investing in R&D initiatives to develop innovative solutions for exploration risks, limitations of geophysical methods, declining production, and flow assurance.
• Two patent grants were secured, and five new patents were filed during the year.
• The Company is collaborating with academia, research institutes, startups, PSUs, and industry bodies.
• Through the ‘SNEH’ program, the Company has supported startups in various sectors, including oil & gas, battery recycling, and hydrogen bus design.
• The Company collaborated with IIM Lucknow Enterprise Incubation Center and IIT Delhi for startup engagement programs.
• OIL-NRL invested ’ 170.15 Crore in R&D activities during FY 2023-24.

M&A Strategy and Execution #

• The Company acquired a majority stake in Numaligarh Refinery Limited (NRL), becoming its promoter and holding company.
• The Company holds participating interests in various NELP, OALP, and DSF blocks, both as an operator and non-operator.
• The Company holds producing assets across Russia, Venezuela & Mozambique through various JVs.
• The Company acquired one block in Assam under OALP Bid Round VIII.
• The Company executed a Joint Venture Agreement with Assam Power Generation Corporation Limited to develop green energy infrastructure.
• The Company acquired 23.9% Stake in CJSC Vankorneft and 29.90% Stake in Taas Yuryakh Neftegazodobycha.

Management’s Track Record in Execution #

• The Company achieved the highest-ever O+OEG production since inception during FY 2023-24.
• Crude oil production increased by 5.76% over the previous year.
• Natural gas production was the highest ever achieved since inception.
• The Company drilled an all-time high of 61 wells during the FY 2023-24.
• The Company successfully commissioned pipelines to reduce gas flaring.
• The Company is currently building a 2.2 KTPA of green hydrogen plant which is expected to be commissioned by June, 2025.

Capital Allocation Strategy #

• Capex investments of ’ 14,675.72 crores were made during the year, including investments by NRL and JVs & Associates.
• The Company plans to invest ’ 25,000 crore in low-carbon initiatives by 2040.
• The Company issued Bonus Shares and recommended a Final Dividend.
• The company has robustly invested in various research & Development initiatives.

ESG Framework #

Environmental Metrics and Targets #

• The Company aims for Net Zero Emissions by 2040.
• Plans to deploy 5-5.5 GW of renewable energy capacity by 2040, focused on wind and solar.
• Gas flaring reduction initiatives were implemented through commissioning of pipelines.
• A 50 KTPA 2G Bio Ethanol plant is in advanced stages of commissioning.
• A 2.2 KTPA green hydrogen plant is being built with expected commissioning by June 2025.
• Registered land parcels under the Green Credit Program (GCP) of MoEF&CC.

Social Responsibility Programs #

• Total CSR expenditure was ₹122.80 crore (3.33% of the average net profit of the preceding three years), exceeding the 2% statutory requirement. NRL also exceeded the amount.
• Key thrust areas of CSR included education, healthcare & nutrition, environment, livelihood, sports, women empowerment, skill development, and rural development.
• CSR initiatives include ‘OIL Sparsha’ (mobile health camps), ‘OIL Arogya’ (maternal and child health), ‘OIL Shakti’ (sanitary napkin production), ‘OIL Super 30’ (educational coaching), ‘OIL Dikhya’ (technology-based learning), and ‘OIL Swabalamban’ (skill development).

Governance Structure and Effectiveness #

• A three-tier governance structure is in place for information security.
• A Vigilance Wing headed by the Chief Vigilance Officer (CVO) advises the Chairman & Managing Director and acts as a link with the Central Vigilance Commission & Central Bureau of Investigation.
• Board committees facilitate decision-making; All recommendations of committees during year were accepted by the Board.
• Internal audit is a corporate reporting function with independent status.
• The Company Did not have the requisite numbers of Independent Directors on its board.

Sustainability Investments and ROI #

• The company plans to invest ₹25,000 crore in low-carbon initiatives by 2040.
• OIL-NRL invested ₹170.15 crore in R&D activities during FY 2023-24, representing 1.92% of PBT.
• ₹9 crore was infused to support the Startup ecosystem during FY 2023-24.
• Renewable energy projects generated revenue of ₹112.30 crore during the year.

ESG Ratings and Peer Comparison #

• CRISIL and CARE Ratings domestically provided the Highest Long Term & Short Term ratings.
• International ratings from Moody’s Investor Service {Baa3 (Stable)} and Fitch Rating {BBB- (Stable)} are at par with sovereign ratings.

Regulatory Compliance and Future Preparations #

• Compliance with the Companies Act, 2013, SEBI (LODR) Regulations, 2015, and DPE guidelines on Corporate Governance, except regarding board composition due to pending SEBI exemptions.
• Complies with applicable Secretarial Standards issued by ICSI.
• Adherence to the Public Procurement Policy for MSEs; procurement from MSEs was ₹1,431.35 crore, with procurement through the Government e-Marketplace (GeM) at ₹1,970.99 crore.
• Implemented the Right to Information Act, 2005, with designated CPIO, CAPIO, and Appellate Authority in each sphere.
• Prepared Business Responsibility & Sustainability Report with assurance hosted on the company website.

Oil India Limited (OIL) Financial Analysis and Future Outlook #

Management Guidance and Assumptions #

• OIL aims to become a net-zero emission company by 2040.
• Management uses a discounted cash flow model, with a discount rate of 13.47% for impairment testing as of March 31, 2024 (12.52% in 2023).
• OIL aims to increase natural gas’s share in India’s energy mix to 15% by 2030.
• Management’s estimation of oil and gas reserves is based on geosciences and engineering data analysis.
• The Company has made bonus shares during the period in the ration of 1:2.

Market Growth Forecasts #

• Global oil demand is expected to level off at around 106 mb/d towards the end of the decade.
• The global natural gas demand is projected to rise from 4,015 bcm in 2022 to 5,360 bcm in 2050.
• India’s real GDP growth forecast for FY 2024-25 is 6.8%.
• India’s oil demand is expected to grow to 6.64 million barrels per day in 2030.

Planned Strategic Initiatives #

• Intensifying Exploration & Production (E&P) activities in producing fields, including increased drilling and workover activities.
• Expediting offshore exploration in the Andaman and Kerala Konkan basins.
• Investing in renewable energy, biofuels, compressed biogas, green hydrogen, and carbon capture utilization and storage (CCUS).
• Developing green energy infrastructure in Northeast India through a Joint Venture Agreement with Assam Power Generation Corporation Ltd.
• Zero flaring operations by March 2025.

Capital Expenditure Plans #

• Capex investments of ₹14,675.72 crores during FY 2023-24, including investments by subsidiary NRL and JVs & Associates.
• Planned investment of ₹25,000 crore in low-carbon initiatives by 2040.
• Planned deployment of 5-5.5 GW of renewable energy capacity by 2040.
• Investment plan of 9 crores in 4 start-ups under SNEH Program.

Efficiency Improvement Targets #

• Reduction of gas flaring through commissioning of pipelines.
• Improvement in operational efficiencies through the adoption of technologies like the Automated Tubing Purging Setup and Dynamic Gas Blending (DGB) system.
• 99.52% availability and 98.87% efficiency in terms of butane recovery were observed in the operation of the LPG Recovery Plant.

Potential Challenges and Opportunities #

• Challenges: Energy transition pressure, crude oil and natural gas market price volatility, stringent environmental regulations, technological disruption, geopolitical tensions, cybersecurity threats, high capital expenditures, depleting reserves.
• Opportunities: Government plans to double exploration areas, recent reforms in the contractual framework, expansion in renewable energy initiatives, and global energy consumption increase.

Scenario Analysis and Sensitivity to Key Assumptions #

• Foreign Currency Risk: A 5% increase/decrease in the INR against USD would impact the Pro/fi.ligat and Equity.
• Interest Rate Risk: A 50 basis points increase/decrease in interest rates would affect the Pro/fi.ligat and Equity.
• Commodity Price Volatility: The company is exposed to price risks related to international crude oil price.
• Investment Risk: OIL has closed two overseas entites, namely OIL India (USA) and Stimul-T, and has also created impairement loss.

Segment-Wise Analysis #

Crude Oil #

• Production increased by 5.76% to 3.359 MMT in FY 2023-24.
• Revenue from crude oil decreased marginally due to lower price realization (USD 83.03/bbl vs. USD 95.47/bbl in the previous year).
• Focus on production enhancement through IOR/EOR techniques, new technologies, and infrastructure upgrades.

Natural Gas #

• Production reached a record high of 3182 MMSCM in FY 2023-24.
• Revenue from natural gas declined due to a decrease in average price realization (USD 6.5/MMBTU vs. USD 7.34/MMBTU in the previous year).
• The company has a target of 5BCM of gas production in coming years.
• Infrastructure development projects are underway to increase gas production potential.

LPG #

• The LPG Recovery Plant operated with high availability (99.52%) and butane recovery efficiency (98.87%).
• Production of 31,550 metric tons of LPG and 20,085 metric tons of condensate in FY 2023-24.
• Revenue from LPG sales was ₹170.40 crores.

Pipeline Operations #

• Transported 6.74 MMT of crude oil in FY 2023-24.
• Highest ever crude delivery to Bongaigaon refinery (2.901 MMT).
• Total revenue from transportation business was ₹533.66 crore.

Renewable Energy #

• Total installed capacity of 188.1 MW, comprising wind and solar energy projects.
• Revenue of ₹112.30 crore generated from renewable energy projects during the year.

Numaligarh Refinery Limited (NRL) (Material Subsidiary) #

• Processed 2,510 TMT of crude oil in FY 2023-24.
• PAT of ₹2,160.11 crore, down from ₹3,702.79 crore in the previous year.
• Ongoing Numaligarh Refinery Expansion Project (NREP) to increase crude processing capacity.