Oil & Gas - India 2Q preview: OMCs return to profit; E&P, gas midstream earnings normalize

We expect Indian OMCs to swing back to profit in 2Q as auto-fuel and LPG marketing losses narrow. Three factors should support auto-fuel margins: (i) the SAED on exports of petrol, diesel and ATF; (ii) the full-quarter impact of retail price hikes; and (iii) lower Brent, which averaged US$96/bbl in 2Q vs US$104/bbl in 1Q. We estimate a petrol marketing loss of INR1.4/L and a diesel margin of INR2.8/L. Upstream E&P earnings should soften on lower crude realizations; we expect ONGC standalone EBITDA to decline 8% QoQ to INR261bn and Oil India down 6% QoQ to INR38bn. Gas midstream earnings normalize from a high base, with GAIL's 2Q EBITDA expected to decline 23% QoQ to INR49bn and PLNG down 8% to INR14bn. CGDs should see steady volume growth of 6-7% YoY with diverging margins, with IGL EBITDA up 13% QoQ to INR3.3bn and MGL flattish at INR3.4bn.