Jefferies signals bullish outlook for ONGC; Sees 56% upside for stock

In the upside scenario, Jefferies gave a target price of ₹430 apiece, which is a 79 per cent upside for the stock

Jefferies Research gave a bullish outlook on Oil and Natural Gas Corp shares, highlighting rising production levels and crude and gas pricing reforms, with a projected 56% upside for the stock.

 

The research firm hosted AK Singh, chairman, and Vivek Tongaonkar, chief executive officer, in the US, where they reaffirmed ONGC’s target of 5-6 per cent annual production growth for the financial year (FY) 2026-28. This growth is driven by the ramp-up of crude and gas production from the KG Basin by mid-CY25, along with new developments at Daman.

 

Jefferies maintained their 'buy' rating with a target price of ₹375 per share, an upside of 56 per cent since the report was published on March 27. In the upside scenario, Jefferies gave a target price of ₹430 apiece, which is a 79 per cent upside. 

 

ONGC has partnered with BP as a technical service provider for a field that contributes 32 per cent of its crude and 20 per cent of its gas production, Jefferies said. Over the 10-year contract, BP aims to boost crude and gas recovery by 44 per cent and 90 per cent, respectively, over ONGC's assumed recovery estimates. "If successful, this could lead to a 5 per cent annual rise in crude and 8 per cent in gas production from FY27 onwards, potentially pushing ONGC’s overall production growth to over 10 per cent CAGR in FY27-30." However, these estimates are not factored into Jefferies' projections. 

 

Mumbai High shares geological similarities with Iraq’s Rumaila oil field, Jefferies noted. BP joined Rumaila’s technical services in 2009, boosting production by 40 per cent over eight years despite a 17 per cent decline rate. Recovery may reach 50 per cent, compared to ONGC’s 30 per cent estimate for Mumbai High, Jefferies said. 

 

Meanwhile, the company expects about 20 per cent of gas production to be eligible for new well gas prices in FY2,6 rising to 100 per cent by 2030. ONGC expects the windfall tax on crude to stay above $100 to attract global players and ensure fiscal stability under the new Oilfields Amendments Bill. This would allow participation beyond the earlier $75 per barrel cap.

 

Jefferies estimates a 2 per cent CAGR for crude and 9 per cent for gas production, but Mumbai High’s growth could exceed expectations. The research firm sees 14 per cent earnings per share (EPS) CAGR for FY25-27, driven by higher production and better gas pricing. It also added that the stock reflects $55 crude, making risk-reward favorable.  

 

ONGC share price: The Stock of the oil exploration and production rose as much as 1.1 per cent during the day to ₹250.8 per share. The stock later trimmed gains to trade 0.35 per cent higher at ₹248.9 apiece, compared to a 0.34 per cent advance in Nifty 50 as of 10:22 AM. 

 

Shares of the company extended gains to their fourth day on Wednesday. The stock has risen 4.2 per cent this year, compared to a 1.73 per cent fall in the benchmark Nifty 50. The company has a total market capitalisation of ₹3.14 trillion, according to BSE data.