VOGL Q1 FY27 earnings call

Vedanta Oil & Gas Limited reported a Q1 FY27 revenue of ₹2,507 crores, marking a 9% YoY increase despite a 3% QoQ decline. EBITDA stood at ₹1,232 crores, up 16% QoQ, resulting in a 49% EBITDA margin. PAT before exceptional items^📎 was ₹194 crores, but after ₹345 crores in exceptional items^📎 (demerger expenses and Cambay impairment), the reported PAT was a negative ₹152 crores. The company maintained a strong balance sheet with near-zero net debt and liquid investments of ₹2,859 crores, earning an AA+ credit rating.

Gross operated production averaged 77.7 thousand barrels of oil equivalent per day (kboepd) in Q1 FY27, a 17% YoY decline. Rajasthan contributed 63.1 kboepd, supported by well productivity improvements and targeted well recovery, with 3 wells online and 5 drilled. The unit operating cost was $17.4 per barrel, down 3% QoQ, driven by efficiencies and optimization in workover and well intervention programs. Management expects FY27 direct operating costs to remain in line with FY26 levels, emphasizing strong cost discipline.

The company reaffirmed its commitment to Health and Safety, focusing on developing a safety mindset across employees and partners. ESG highlights include renewable power sourcing of 40+ million units (MM kWh), leading to 124 ktCO2e/annum emission avoidance, and processing ~12 kbbls of waste and sludge. Community outreach programs benefited ~0.6 million individuals, and ~1,000 students were supported through career counseling and vocational training, demonstrating progress across ESG.

The market continues to be affected by geopolitical conflicts, leading to continued disruptions in global oil production and supply chains, particularly from the Middle East. The swinging status of the Strait of Hormuz and the Red Sea conflict contribute to increased volatility in oil prices. Supply gluts during brief open periods have sharply driven down oil prices, inducing even more variability. Damages to Qatar's gas processing facilities are also expected to impact global gas trade balances for the foreseeable future.

The broader Vedanta group plans to invest approximately ₹20,000 crores in capex across its five entities in FY27, while simultaneously targeting a further deleveraging of $2-2.5 billion at the VRL level. VRL has already significantly reduced its debt from $10 billion to $5 billion as of June 30. The group's capital allocation strategy aims to balance growth investments, debt reduction, and shareholder returns, with a target of 4-5% dividend on each company's market capitalization.

Vedanta is exploring the demerger of its non-core real estate assets into a pure-play company to unlock significant value. The company holds over 2,000 acres of land, with an aspirational value of ₹30,000 crores or $3 billion. This demerger process, similar to the current entity demergers, is expected to take approximately a year to complete, indicating a significant future strategic move for the broader Vedanta group.