Oil India trades higher for 7th straight day, hits 18-month high

HDFC Securities has a BUY recommendation on Oil India with a revised price target of Rs 183

Shares of Oil India hit an 18-month high of Rs 161.60, up 3 per cent on the BSE in intra-day trade on Monday on improved outlook.

The stock of the state-owned oil exploration and production company was trading at its highest level since November 2019. It was quoting higher for the seventh straight trading day. In the past one month, Oil India has gained 22 per cent as compared to a 2.7 per cent rise in the S&P BSE Sensex.

Analysts expect oil prices to increase to ~ $59/61 per barrel in FY22/23E vs. $ 44/bbl in FY21 given global economic rebound post-Covid. The company’s January-March quarter (Q4FY21) revenue was in line with analyst estimates while Ebitda (earnings before interest, taxes, depreciation, and amortisation) was below estimate, on account of high support services, led by survey expenses.

The brokerage firm HDFC Securities has a BUY recommendation on Oil India. Its revised price target of Rs 183 is premised on an increase in crude price realisation (currently at ~ $75/bbl) and improvement in domestic gas price realisation (at $2.5/mmbtu).

“Oil India has an intensive three-year drilling program in focus assets (Lakwagaon, Balimara, Baghjan, Khumchai and Baghewala) and expects total output to rise to 7.0- 7.2mmtoe by FY24-25. Baghjan appraisal has proved to be better than expected. Oil India has got permission for extended reach drilling, and won’t need to enter eco-sensitive zones. FY22 crude/gas production guidance is 3.05mmt/3.1-3.2bcm. It expects production to bottom out,” analysts at Emkay Global Financial Services said in the result update.

Oil India is trying to reduce the number of older non-producing wells and convert them to producing ones, and also trying to sort out bottlenecks. "In two-three months, the Baghjan pipeline should be ready. The company is in the process of digital modelling all fields and identifying areas with untapped oil. It plans to address issues in mature fields by utilizing this approach," it added.

At 01:32 pm, Oil India was trading 2.7 per cent higher at Rs 160.95 on the BSE, as compared to a 0.22 per cent decline in the S&P BSE Sensex. A combined around two million shares had changed hands on the NSE and BSE so far.