Petronet LNG reported earnings revenue growth of 25.8% QoQ despite volumes suffering in Q2FY22

Petronet LNG (PLNG) reported Q2FY22 earning revenue of Rs. 108131mn, up 73.4% YoY and 25.8% QoQ, EBITDA of Rs. 12.9bn, down -4.9% YoY, and up 23% QoQ on account of high marketing margin (2x YoY), while the decline was due to modest volumes of 4.6MMT down 5.5% YoY which a result of high spot LNG prices which jumped ~5x YoY and covid-led restrictions.

The spot LNG prices are now trading ~50% higher QoQ at ~US $30/mmbtu. While spot LNG prices remained high, PLNG earned a higher marketing margin of USD6.9/mmbtu which is ~2x YoY. 

Dahej volume fell 7.4% YoY led by a modest terminal utilisation of 99%, but Kochi volumes rose 36% YoY with a terminal utilisation of 23%. The company expects to complete Dahej expansion to 20mtpa by FY24 and to 22.5mtpa by FY27. Kochi sales are likely to double at peak utilisation of 35% once customers fully offtake gas along the recently commissioned Kochi-Mangalore pipeline. The Kochi-Bangalore pipeline, upon fully commissioned completion by FY24, will increase Kochi’s utilisation to ~60%. The company is also working towards adding two tanks at Dahej at Rs. 12bn and a jetty at Rs. 17bn by FY25, which will be value-accretive and incur capex of Rs. 17bn. The company has tied up with Gujarat Gas to set up five LNG stations between Mumbai and Delhi highways and has set up four LNG stations with IOC and one each with IGL and Sabarmati Gas. PLNG declared a special interim dividend of INR7/share.

PLNG is likely to incur Rs. 10bn in FY22 as it plans to install 1,000 LNG stations over the next five years, which would incur capex of Rs. 80bn. This will not only increase its LNG demand, but also overall utilisation. 

The key factors that may impact the future outlook of the company could be the current annual escalation of 5% in re-gasification charges which may not persist after a while if they begin to impact the demand, prolonged gap between long-term RasGas and spot-LNG prices resulting in lowering of term LNG volumes, high gas prices which may lower demand for R-LNG making it unviable for PLNG to source more long term supplies and increase in domestic gas production and start of other LNG terminals in the country could lead to lower utilisation for PLNG.