By Eric Yep
-- Essar Oil posts first-quarter profit of INR4.69 billion on strong refining margins
-- Board approves raising $1.5 billion in overseas loans for expansion
-- Vadinar refinery to be shut for 35 days from Sept. 18 for maintenance, expansion
-- Expanded 18-million-ton refinery to begin production in January-March
(Adds details on fund raising in 11th and 12th paragraphs, coal seam gas business in 19th paragraph onwards)
MUMBAI (MarketWatch) -- Essar Oil Ltd. (500134.BY) said Monday it swung to a net profit in its first quarter helped by higher refining margins, and plans to raise $1.5 billion in foreign currency loans to fund expansion projects.
Net profit for the April-June period was INR4.69 billion, compared with a loss of INR700 million a year earlier, the unit of diversified conglomerate Essar Group said. Sales rose to INR151.99 billion from INR107.27 billion.
Quarterly gross refining margin--or earnings on converting crude into fuel products--improved to $7.38 a barrel from $5.79 a year earlier, Essar Oil said in a statement.
The company said its Vadinar refinery processed 3.62 million metric tons of crude in the first quarter, compared with 3.68 million tons a year earlier.
Essar Oil is expanding its annual refining capacity to 18 million tons from 14 million tons, encouraged by strong refining margins in Asia and demand growth for fuel products in India.
One million tons is equal to 20,000 barrels a day.
The company said it continues to focus on the domestic market because of "superior price realization," although the share of exports in its total revenue rose to 32% during the quarter from 27% a year earlier.
It said the Vadinar refinery will be shut for 35 days from Sept. 18 for a revamp of its main units, maintenance and to link up the expanded units.
The expansion will allow it to process more complex varieties of crude and improve refining margins, the company said. It expects the expanded refinery to begin output from the first quarter of 2012.
Essar Oil plans to further raise its annual refining capacity to 20 million tons by September 2012 and to 38 million tons in a later phase.
It said its board has approved plans to raise foreign currency loans of up to $1.5 billion, instead of rupee loans, for the ongoing expansion projects to take advantage of favorable overseas borrowing terms.
