The company expects slowdown in petrochemical segment, but no slowdown in oil & gas sector, which constitutes 65% of total business
Key highlights of Post Q3FY09 results:-
Liquidity environment during Q3 was tight and the interest rates went up sharply. The business environment was not affected much but there was fear everywhere as to what will happen. However such environment has eased with many regulatory initiatives and it is business as usual for the company.
According to the management, the low oil prices are temporary and even though the current oil prices are hovering around US$ 40, the six months forward contract all are trading above US$60. The emerging countries will drive the overall oil demand going forward. Even if the oil prices remains around this region, there is no slowdown expected in Middle East and OECD nations because of the huge reserves of trillions of dollars and their low break even cost of production of oil. For Libya the break even is at US $20, Qatar is at US$9, Middle East at US$8 and Saudi Arabia because of its location, has breakeven at US$45.
As far as infrastructure spending is concerned, in Middle East and Gulf regions, the real estate investments have slowed down drastically. Oil & gas sector will continue to see investments given the low cost in the region. Saudi Arabia and Iran have planned major investments in energy downstream segments and other industrial complexes to diversify the economy. According to the management, the petrochemical cycle has peaked out and will see slowdown in investments going forward as the margins are down severely. For oil and gas sector, no international company in this business would make the mistake which Shell did in 2002 period where oil prices where hovering around US$35 and the company stopped further spending on Exploration business. As a result of which in 2007, the company disclosed that the reserves have gone down drastically which lead the change in management upfront and crash in stock prices of Shell.
In India, the power and gas pipeline business will continue to see major investments given the need of energy in India. However the projects of PPP may be impacted in short term. Robust investments in Oil & Gas will continue in countries like Libya, Algeria, Tunisia & Morocco due to large trade surplus which these countries are carrying.
Punj Lloyd together with its subsidiaries Sembawang Engineers and Simon Carves, has present order book position of Rs 21908 crore. Punj Lloyd standalone has order book of Rs 16500 crore, Simon Carves has around Rs 1300 crore and the rest orders are of Sembawang. Of the total order book position of Simon Carves, the legacy orders stands around Rs 400 crore. Punj Lloyd over the years has established itself as a vey strong player in Oil & Gas, Petrochemical, Power and infrastructure space. Punj Lloyd is present in the entire value chain of operations starting from engineering, procurement, construction and post completion activities.