New Delhi

India’s upstream oil and gas companies are likely to see significant gains from rising global crude prices, driven by higher realizations, improved margins, and stronger cash flows, according to a report by Yes Securities.

The report noted that upstream firms—engaged in exploration and production—benefit directly from global oil benchmarks, as crude price increases translate into higher earnings. With production costs remaining relatively stable, much of the additional revenue flows into profits.

This creates strong operating leverage, leading to expansion in profitability and EBITDA margins. “Incremental revenue flows disproportionately into operating profits,” the report said, highlighting the sector’s ability to capitalise on favourable price cycles.

Higher realizations are also expected to improve financial flexibility, enabling companies to fund exploration and production expansion, reduce debt, and maintain steady dividend payouts.

The report added that refinery utilisation levels in India are likely to remain robust at 95–100 per cent, supported by steady domestic demand and diversified crude sourcing.

It also pointed to tightening global availability of refined petroleum products—partly due to India’s export curbs—which could further support refining margins.

Overall, the upstream sector is seen as structurally well-positioned in a high crude price environment, with improved earnings outlook and stronger balance sheets.

However, the report cautioned about potential policy risks, including windfall taxes or increased dividend expectations during periods of elevated oil prices, which could partly offset gains.

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Despite these concerns, the outlook for upstream companies remains positive, with rising crude prices acting as a key tailwind for growth and investment.