GAIL announces Rs 1,046.35 cr share buyback
GAIL (India) Ltd, the nation’s largest gas distribution firm, on Friday announced a Rs 1,046.35 crore share buyback programme as it looked to return surplus cash to shareholders, the biggest being the government of India. In a stock exchange filing, the company said its board has approved the buyback of 6.97 crore shares at a price of Rs 150 per share. The shares being bought represent 1.55 per cent of the total number of fully paid-up equity shares. The company board also declared an interim dividend of 25 per cent (Rs 2.50 per share) for financial year 2020-21. GAIL stock was down 2.2 per cent on the BSE and was trading at Rs 140.75 at 14.15 Hrs. The government owns 51.76 per cent of GAIL and is expected to participate in the share buyback. It stands to get Rs 583.6 crore from the dividend payout and another Rs 541.5 crore if it participates in the buyback by tendering a proportionate number of shares. The buyback plan of Rs 1,046.35 crore represents “2.5 per cent and 2.26 per cent of the aggregate of the fully paid-up equity share capital and free reserves of the company,” GAIL said in the filing. The plan was within the statutory limits of 10 per cent, it said. The record date for buyback of equity shares as well as payment of the interim dividend will be January 28, GAIL said. The government has asked at least eight state-run companies to consider share buybacks as it scours for ways of raising funds to rein in its fiscal deficit. The firms asked to consider share buybacks include miner Coal India, power utility NTPC, and minerals producer NMDC. A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available in the open market. Companies buy back shares for a number of reasons, such as to increase the value of remaining shares available by reducing the supply or to return surplus cash to shareholders. The government wants public sector undertakings to either meet their targets for capital expenditure or “reward the shareholder in the form of a dividend” or share buyback. The government, which holds 51.76 per cent of GAIL, is likely to participate in the GAIL buyback just as it did in the case of NTPC, Engineers India Ltd, RITES and KIOCL. Finance Minister Nirmala Sitharaman had in her budget for 2020-21 set a target of raising Rs 2.1 lakh crore from privatisations and the sale of minority stakes in state-owned companies. The share buyback, as well as the dividend, is counted as part of this target. According to the Department of Investment and Public Asset Management (DIPAM), the government has so far raised Rs 28,298.26 crore from disinvestment proceeds. This includes Rs 14,453.77 crore received as dividend from state-owned firms. The remaining Rs 13,844.49 crore proceeds include Rs 1,065.37 crore from selling shares in NTPC share buyback. The government is likely to miss its disinvestment target by a wide margin and the fiscal deficit is not likely to be anywhere near the target of 3.5 per cent of the GDP in 2020-21 (April 2020 to March 2021). While privatisation of firms such as Bharat Petroleum Corporation Ltd (BPCL) and Air India Ltd has been pushed into next fiscal due to COVID-19-related delays, tax collections have been hit hard as restrictions imposed to curb coronavirus dented incomes all around.
U.S. shale producers lock in future sales as oil prices rise to one-year high
shale producers are taking advantage of the oil market’s rally to levels not seen in nearly a year by locking in prices for future sales, sources familiar with the matter said. U.S. crude futures this month jumped above $50 a barrel to the highest since February. The rally has sparked optimism among shale companies, but after a bracing year of pandemic-induced demand destruction, they are not ready to ramp up production. Instead, they are using futures markets to lock in higher sale prices. Shale producers buy and sell contracts in the futures and options markets in a process known as hedging to secure cash flows for later-dated sales. U.S. oil production peaked at nearly 13 million barrels per day in late 2019, but is now around 11 million bpd after the coronavirus lockdowns crushed fuel demand and oil prices. Output is not expected to rise much in 2021, but those that hedged now are guaranteed sales of barrels at more than $50 even if prices drop again. “There’s a lot of hedging going on,” said Chris Wright, chief executive of Liberty Oilfield Services, the second-biggest fracking company in North America. “At the prices available today, producers with good acreage can do pretty well.” Producers’ short positions in U.S. crude futures and options, an indication of hedging activity, have been rising since autumn. They hit a five-month high in mid-December, according to the U.S. Commodity Futures Trading Commission. In 2020, 46 North American exploration and production companies declared bankruptcy, according to energy law firm Haynes and Boone, while others merged to reduce debt. Investors had already been pressuring shale companies to curb spending and boost returns even before the pandemic. “Producers locked in a certain amount of wells at a certain price and hedging at $50 makes you look like a rockstar. This year will be about free cash flow,” one executive at a U.S. shale producer said, on condition of anonymity. Producers that are hedging are likely locking in about 15% to 20% of production at a time, said Tom Petrie, chairman at energy investment bank Petrie Partners. Some companies are holding off because they anticipate prices to rise further, perhaps to $60 or $65. Global benchmark Brent crude, which also hit 11-month highs this week near $57, could rise to $65 per barrel by summer 2021, Goldman Sachs said this week. “Some of them (producers) are pretty torn between hedging at a level they would have killed for six months ago and their perpetually optimistic nature,” said Steve Sinos, vice president at consultancy Mercatus Energy, which advises corporations on hedging. Average 2021 U.S. crude prices have climbed above $52, also their highest since February. Signs of increased hedging activity can also be seen in U.S. crude futures time spreads. The premium for U.S. crude for delivery in December 2021 has climbed to more than $2.80 a barrel over those for delivery in December 2022 this week, a signal that producers are selling the later-dated contract to fund their hedges for 2021, dealers said.
MNGL to launch mobile CNG refuelling pumps in Maharashtra: Official
Maharashtra Natural Gas Ltd (MNGL) will launch mobile CNG refuelling pumps in Maharashtra, according to a senior official of the company. MNGL is a joint venture of Bharat Petroleum Corporation Ltd and Gas Authority of India Ltd. The research in underway for the mobile CNG refuelling units, said MNGL Independent Director Rajesh Pande on Wednesday. He added that the company will launch such refuelling pumps in the next 6 months in Maharashtra. On the occasion of the 15th foundation day, company officials and Pune MP Girish Bapat informed about the works undertaken by the firm since its incorporation in 2006. It will be the first-of-its-kind experiment in India. The company is already supplying gas through pipeline to 3.2 lakh houses and major industries in Pune and the Pimpri-Chinchwad region. It will also expand its operation in Nashik, Dhule, Sindhudurg, and other regions, Pande said.
Fuel prices flare up but no tax cut signs
Petrol price remained on a roll, claiming a new peak at Rs 84.7 a litre in the national capital and 2 paise short of its all-time high of Rs 91.07 in Mumbai on Thursday. Diesel price too rose as retailers continued to pass on the staggered impact of crude’s week-long rally. After the latest hike, diesel cost Rs 74.88 a litre in Delhi and Rs 81.6 in Mumbai. While consumers continued to pay through their nose, there was no sign the Centre or state governments were considering any reduction in the hefty taxes they levy on motor fuels, which amp up the impact of rise in crude price. In Delhi, for example, consumers pay Rs 32.98 as excise duty on each litre of petrol and Rs 31.83 on diesel. VAT amounts to Rs 19.32 on petrol and Rs 10.85 on diesel. The only hope for consumers, it seems, lies in a correction in the global oil market, which saw benchmark Brent easing to $55.64 a barrel, down from $57 days ago. Reports of lockdown following fresh virus surge in parts of China, the world’s second-largest oil consumer, and extended Covid-19 curbs in Europe on fresh scare tempered market sentiment that was buoyed by vaccine rollout and Saudi offer to cut production by an additional million barrels a day. While the market grapples with the challenge of these conflicting signals, consumers in India, which imports over 80% of its oil, keep hoping for relief by way of a reduction in fuel taxes that make up about 60% of the pump prices.
Azerbaijan set to boost gas exports via TANAP pipeline in 2021
Azerbaijan plans to raise gas exports via the Trans-Anatolian Natural Gas Pipeline (TANAP), mainly to Turkey, to 12.2 billion cubic metres (bcm) this year from 5 bcm in 2020, Saltuk Duzyol, head of the consortium, said on Thursday. By boosting gas supplies via the route, Baku is raising the stakes in its rivalry with Moscow for the lucrative European market following the start of Azerbaijan’s gas sales to the region in December via the Trans-Adriatic Pipeline (TAP) pipeline. Duzyol said that 6.2 bcm of the Azeri gas will be shipped to Europe via TANAP. On top of that, 6 bcm will be sold to Turkey’s domestic market. TANAP comprises the longest stretch of the $40 billion Southern Gas Corridor, a series of pipelines that carries gas from Azerbaijan’s Shah Deniz II field. The $6.5 billion TANAP crosses the breadth of Turkey, east to west, and could transport up to 16 bcm of Azeri gas a year. The pipeline connects to the TAP, which became operational in the end of 2020. TANAP’s shareholders are Azeri state energy company SOCAR (51%), Turkish pipeline operator BOTAS (30%), BP (12%) and SOCAR Turkey (7%).