Nuvama Institutional Equities has adopted a strategic shift in the oil and gas sector, recommending Reliance Industries and Petronet LNG over traditional favorites like ONGC, GAIL, and oil marketing companies. According to latest reports from ET Now, the brokerage expects aggregate EBITDA for oil and gas companies to decline around 9% year-on-year in Q2 FY27, primarily due to sharp earnings decline at oil marketing companies. However, stronger performances from Reliance Industries and ONGC are expected to partly offset this weakness. The brokerage's coverage remains strongly positive, with Buy ratings dominating across the oil and gas sector.
Nuvama expects Reliance Industries' consolidated EBITDA to rise 17% year-on-year and 13% sequentially in Q2 FY27, driven primarily by its oil-to-chemicals and digital businesses. As reported by ET Now, the brokerage estimates RIL's O2C EBITDA to jump 38% year-on-year and 22% quarter-on-quarter, supported by robust refining margins and middle-distillate spreads. Digital EBITDA is expected to increase 16% year-on-year and 3% quarter-on-quarter, helped by higher average revenue per user and subscriber additions. However, the strength is likely to be partly offset by weaker retail and upstream oil and gas operations. Retail EBITDA is estimated to decline 1% YoY, while O&G EBITDA is expected to fall 6% amid lower KG-D6 production and weaker gas realisations. Nuvama forecasts RIL's Q2 FY27 revenue at ₹2,92,437 crore, up 14.9% year-on-year, while PAT is estimated at ₹20,905 crore, representing growth of 15.1% from the previous year.
The brokerage expects Petronet LNG's EBITDA to increase 33.4% year-on-year to ₹1,490 crore, while PAT is projected to rise 37.6% to ₹1,109 crore. According to ET Now, this growth is expected to be driven primarily by a 52% year-on-year rise in regasification volumes, stronger margins on spot volumes, and a 5% year-on-year tariff hike. Nuvama expects Dahej utilisation to recover to 70% from 65% in the preceding quarter, while Kochi utilisation is projected to remain broadly unchanged at 22.8%. The company's strong performance is anticipated to offset weakness in other oil and gas segments.
The sharpest earnings weakness is expected among state-run oil marketing companies, with BPCL, Indian Oil and HPCL facing an estimated combined EBITDA decline of 85.9% YoY. As reported by ET Now, Nuvama estimates their combined EBITDA to decline despite improving sharply on a sequential basis. The brokerage noted that petrol and diesel product cracks have surged, with Singapore GRM rising around 4.7 times YoY to $18 per barrel. Nuvama estimates Q2 GRMs of $42 per barrel for BPCL, $38 for IOC and $25 for HPCL. However, the benefit from stronger refining margins is expected to be overwhelmed by weak fuel marketing economics. Diesel retail margins are estimated at negative ₹24.5 per litre, compared with positive ₹5.6 per litre a year ago, while petrol margins are estimated at negative ₹3.1 per litre, against positive ₹10.7 per litre in Q2FY26.
ONGC's Q2FY27 EBITDAX is estimated to increase 44.3% YoY, supported by a 33% increase in benchmark Brent crude prices and a 9.5% depreciation in the rupee. However, these benefits are expected to be partly offset by lower production. Nuvama estimates ONGC's oil production to decline around 4% YoY and gas production by about 2%. ONGC's PAT is projected at ₹13,939 crore, up 41.5% YoY, while revenue is estimated to grow 33.7% to ₹44,174 crore. GAIL's EBITDA is expected to increase 52.1% YoY to ₹4,853 crore, supported by better marketing spreads, natural gas transmission and improved LPG and petrochemical performance. Marketing EBITDA is projected to rise 19% YoY on a 26% improvement in marketing spreads, while natural gas transmission EBITDA is expected to increase 19%, aided by an 11% tariff increase and 7% volume growth.
