Essar Energy’s Refining Margins at Stanlow Fall as Prices Weaken

on Aug 16, 2013
Listen, Friday, August 16th: Essar Energy Plc (LON:ESSR), the London-listed oil and gas unit of privately owned Indian conglomerate Essar Group, today said that its refining margins at its Stanlow refinery in the UK dropped by more than a third in the first quarter of fiscal 2014 as a result of weaker diesel and jet fuel prices relative to petrol. Earlier this week Essar Energy’s oil refining unit Essar Oil (NSE:ESSAROIL) released first-quarter results showing growth in revenue. Essar Energy’s share price was marginally down in morning trading in London today, whereas Essar Oil’s share price soared nearly five percent in intraday trading on the National Stock Exchange of India.

**Essar Energy’s Q1 Refining Margins at Stanlow Drop**
Essar Energy said in an interim management statement that current price gross refining margins (CP GRM) at its Stanlow refinery fell to $4.86 per barrel in the quarter ended June 30, 2013 from $7.53 per barrel in the prior-year quarter. The company attributed the decline in margins to “generally lower industry margins”, as well as weaker diesel and jet fuel prices relative to petrol. Throughput at the refinery fell about two percent to 19.27 million barrels.

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The company recorded better results at its Vadinar refinery in India where CP GRM averaged $7.01 per barrel in the quarter ended June 30, 2013, up 49 percent year-on-year. Throughput at the Indian refinery rose 15 percent to 36.34 million barrels.
Essar Energy said preparations were at an advanced stage for a turnaround at Stanlow in the second half of fiscal 2014. The company is planning an uplift of $4 per barrel in margins by the end of fiscal 2015 as compared with July 2011 when the company acquired the refinery. Essar Energy said it had achieved $2.3 per barrel of the target in question at the end of June 2013.

**Essar Oil’s Turns to Positive Q1 EBITDA**
On Wednesday, Mumbai-based Essar Oil released results for the first quarter of fiscal 2014, showing a turnaround to profit and rise in revenue. It reported earnings before interest, tax, depreciation and amortisation (EBITDA) of 11.06 billion Indian rupees (£114.5 million), compared with a loss of 1.78 billion Indian rupees (£18.4 million) in the first quarter of fiscal 2013.

The company’s gross revenues rose 12 percent, with domestic sales accounting for about 70 percent of the total revenue during the reported quarter. Essar Oil also said it had re-entered the recently deregulated Indian bulk diesel market.
In March, Essar Oil shifted exposure from rupee to dollar-based debt to cut financing costs at the parent company. In its first-quarter statement, the company noted that it had converted rupee term loans into equivalent foreign currency debt of $340 million (£217.4 million), taking its total dollar-based debt to $821 million (£525 million).
**Essar Energy’s share price was 0.22 percent down at 135.00p in London as of 10:34 BST on August 16.**
**Essar Oil’s share price was 4.97 percent up at 63.35 Indian rupees in Mumbai as of 10:23 BST on August 16.**


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