ONGC share price with gains of more than 2% among highest Nifty 50 gainers today
- Stock Market Today- With gains of more than 2% ONGC was amongst highest Nifty 50 gainers . The analysts estimate for ONGCs net realizations stood at $70-75 a barrel for FY24and hence drop in Brent prices to $76 a barrel levels does not impact its earnings outlook much.
ONGC share price with gains of more than 2% was the largest gainer amongst Nifty stocks in morning trades on Monday. The stock is also trading close to its 52-week highs.
The investor sentiments that earlier had taken some beating with decline in Brent crude prices however have rebounded will . The analysts don’t see much impact to ONGC’s net crude oil realisations considering the fact that there is a windfall tax that continues to get adjusted. Thus, net realizations for Upstream oil producers as ONGC are estimated to remain close to $70 as per various analyst estimates. For Instance, analysts at JM Financial had estimated Brent to average at $75 a barrel during FY24 had estimated ONGC’s net realizations at $75 a barrel.
Hence with Brent Crude cooling down to $76 a barrel level, not much impact is expected on ONGC’s earnings.
For ONGC the key upside trigger thereafter can come from rise in oil and gas production. ONGC’s gas production from KG D6 basin is already being anticipated to rise. Analysts at Motilal Oswal Financial Services Ltd in their recent report have said that ONGC has reiterated its commitment to raise production to 50mmtoe by FY28; mmtoe stands for million metric tonne of oil equivalent. . This will be driven by 23 ongoing projects (9 infrastructure projects and 14 development projects) for a total capex of ₹60000 crore
Gas production from Cluster II of KG-DWN-98/2 commenced in Mar’20, while oil production is also expected to commence soon.
ONGC's interntionl arm ONGC Videsh Ltd is lso likely to see rise in production and anlysts at MOFSL say that OVL’s medium-term production target is 15mmtoe , while its FY24 guidance is 11mmtoe. OVL may expand its asset base, but its acquisition strategy will focus on fields that are close to production commencement.
The rise in production also can provide earnings trigger even if crude net realizations see limited upside,
Analysts at JM Financial post Q2 had maintained Buy on strong dividend play and as market price was discounting $ 55-60 a barrel of net crude realization: Their target price had gone up to ₹225 . They had maintained Buy given strong dividend play (of 6-8%)
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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