Petronet LNG - Q1FY21 earnings call takeaways - ICICI Securities

Key takeaways from Q1FY21 earnings call:

- PLNG is likely to go for a long-term contract under which LNG would be supplied on a sustainable basis at spot LNG prices or lower: Company is talking to multiple potential suppliers including Tellurian with whom the existing MoU is valid until Dec'20. Multiple suppliers appear open to supply LNG under long-term contracts at spot LNG-linked prices. PLNG estimates demand for spot price-linked LNG at 7-8mmtpa going forward. It would be able to earn trading/marketing margins on such volumes in addition to regas charge.

- Decision on whether Kochi terminal regas charge would be cut further likely by end-Q2FY21: Kochi terminal regas charge was cut in FY20 to Rs79.14/mmbtu from Rs104/mmbtu. However, offtakers of LNG from the terminal want a further cut as the regas charge is higher than that even at the two new terminals commissioned in CY19-CY20. PLNG is reluctant to further cut regas charge as cut below Rs75/mmbtu may require it to provide for impairment in value of Kochi terminal. PLNG has in fact increased regas charge by 5% to Rs83.1/mmbtu from Apr'20 as per terms of the contract with the offtakers. Meanwhile, the issue of whether to cut Kochi terminal regas charge has been referred to a committee of independent directors. PLNG expects a decision in the matter by end-Q2FY21.

- Dahej utilisation guided at 100% or higher in Q2: Current utilisation of Dahej terminal is at 104% (81% in Q1) and of Kochi at 17-20% (14% in Q1).

- Kochi-Mangalore pipeline is likely to be completed by end-Aug'20. PLNG expects it to push Kochi terminal utilisation to 30-35% by Mar'21.

- Cargoes on which PLNG invoked force majeure in Q1FY21 can be made up at any time during the remaining period of the contract; need not be made up in CY20: PLNG invoked force majeure on eight cargoes of RasGas and one of ExxonMobil in Q1FY21. The terms of the contracts with RasGas and ExxonMobil provide for invocation of force majeure in case of an epidemic and the volumes to be made up at any time later during the remaining period of the contract. The contract with RasGas is for supply up to CY28 and that with ExxonMobil for supply up to CY36.

- ExxonMobil has assured that LNG supply would continue from alternative sources despite Gorgon shutdown (until Sep'20): PLNG's contract with ExxonMobil to supply 1.44mmtpa LNG from the Gorgon facility provides for supply from alternative sources in situations like the current one.

- Capex update: PLNG has guided FY21E capex at Rs3.48bn. Board-approved capex is Rs25bn - Rs12bn for adding two storage tanks and Rs13bn for the third jetty at Dahej. These projects are likely to be completed over the next 39 months.

- Decision on East coast terminal likely in six months: PLNG is likely to go ahead with the proposed LNG terminal at Gopalpur in Odisha if at least 30% of the capacity is tied up. A 20km pipeline would be needed to connect the terminal to the Angul- Srikakulam pipeline. Board approval is likely in the next six months.

Shares of PETRONET LNG LTD. was last trading in BSE at Rs.257.95 as compared to the previous close of Rs. 254.45. The total number of shares traded during the day was 391471 in over 5355 trades.

The stock hit an intraday high of Rs. 267.7 and intraday low of 256.95. The net turnover during the day was Rs. 102036080.

Source : Equity Bulls

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