ONGC jumps 9% after clarification on fire incident in Navi Mumbai plant

Shares of Oil and Natural Gas (ONGC) jumped as much as 9.02 per cent to Rs 129.80 on the BSE in the early trade on Thursday.

At 10:04 AM, the stock was trading 8 per cent higher at Rs 128.60 apiece on the BSE. In comparison, the benchmark S&P BSE Sensex was trading 100 points or 0.27 per cent higher at 36,825. 

The stock got a boost after India's foreign secretary said on Wednesday that India and Russia are targeting $30 billion of annual trade by 2025. 

"Seeking to boost bilateral trade from its current $11 billion, the two countries announced deals in sectors including energy, defence and shipping after a meeting between Russian President Vladimir Putin and Prime Minister Narendra Modi at an economic forum in Vladivostok," Reuters reported. 

The Delhi-headquartered oil and gas company on Wednesday issued a clarification on the fire accident that took place on Monday (September 3) in its Uran processing unit. 

"The accident occurred near Demineralized Water Plant (Oily Water Sewage Pit) and CISF security cabin which was outside the main process area. All out efforts were made to control the situation and fire was brought under control within a short span of time with the internal safety provisions aided by MARG (Mutual Aid Resource Group)," the company said in its BSE filing. 

The company further said the offshore crude supply remains unaffected and the impact of fire in local vicinity is nil.

"We do not see a major impact of the fire incident at Uran plant on ONGC gas sales in 2QFY19. However, In July’19, ONGC’s gas sale fell by 3.4 per cent YoY led by 1.2 per cent fall in production and higher internal consumption," Yogesh Patil, Research Analyst at Reliance Securities had said on Monday. 

Patil further said that fall in oil prices can impact earnings in FY20. Additionally, since the target for disinvestment receipts has increased to Rs 1.05 trillion for the financial year 2020 (FY20), it will be key overhang on the stock as the government holds 64.25 per cent stakes in ONGC. 

"The stock is trading at 4.9x of FY20 earnings per share (EPS) and 3.1x of FY20E EBITDA (consensus) which is discount to long term average. Positive view on stock," Patil added. 

Thus far in the calendar year 2019 (CY19), shares of ONGC have underprrformed the market by falling around 21 per cent. On the other hand, the S&P BSE Sensex has gained nearly 2 per cent while S&P BSE Energy has added 1 per cent, ACE Equity data show.