ONGC in demand after brokerage upgrade

ONGC surged 8.02% to Rs 98.95 after a global brokerage firm reportedly upgraded the stock to 'overweight' from 'equal weight' and raised its price target to Rs 115 from Rs 84 earlier.

As per reports, the brokerage cited higher probability of recovery in average selling prices, improved outlook on domestic production and upside in refining associates post closures.

On Thursday, Brent Crude prices crossed $50 per barrel for the first time since March 2020. The February 2020 settlement contract gained $1.39 or 2.84% to settle at $50.25 in yesterday's trading session. The contract was currently trading 5 cents higher at $50.30 a barrel.

Firm crude oil prices could increase realizations from crude sales for oil exploration firms like ONGC.

Last week, ONGC announced that its wholly owned overseas arm ONGC Videsh (OVL) made a "significant" strike of oil in its onshore block CPO-5 in Llanos Basin in Colombia. The light oil was discovered in the first well Indico-1X in the Indico field during December 2018, and to-date it has demonstrated a sustained flow at 5200 BOPD with a cumulative production of over three million barrels of oil so far.

CPO-5 is a large onland block covering 1,992 square kilometer (SKM) and offers exploratory and appraisal opportunities. This is the fourth commercial find in the block by OVL, which now plans to drill more wells to explore other plays in the block in immediate future.

OVL holds participating interest in seven exploratory blocks in Colombia in addition to two producing blocks with 50% stake in a joint venture company Mansarovar Energy Colombia.

Shares of ONGC have rallied 25.67% in December so far while the benchmark S&P BSE Sensex and the S&P BSE Oil & Gas index have added 4.63% and 10.15%, respectively.

ONGC is India's largest integrated oil and gas company. ONGC is 60.41% owned by the Government of India (as on 30 September 2020).

The state-run oil major's consolidated net profit fell 19% to Rs 4335 crore on 17.7% decline in net sales to Rs 83,619.16 crore in Q2 September 2020 over Q2 September 2019.

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