ONGC hits 7-year high; jumps 9% in 2 days on discovering major gas reserves

Shares of Oil & Natural Gas Corporation (ONGC) rose 3 per cent on BSE to the highest level in over seven-years in Monday's trade. The stock jumped to Rs 230.40, its highest level since November 2016.

The stock had hit a record high of Rs 314.57 on January 9, 2014, data shows.

The strength comes after the state-owned company made two consecutive natural gas discoveries in Mahanadi basin block. In the past two trading days, the stock of the oil exploration & production company has surged 9 per cent.

According to a PTI report, ONGC has made two significant back-to-back natural gas discoveries in a Mahanadi basin deepwater block in the Bay of Bengal as its calculated game plan of venturing into high-risk deep water exploration starts yielding results. CLICK HERE FOR FULL REPORT

Earlier, on January 1, 2024, ONGC had announced the successful commencement of “First Oil” production from the deep-water KG-DWN-98/2 Block, situated off the coast of Bay of Bengal.

With commencement of this First Oil from ‘M – field’ on January 7, 2024, ONGC is completing Phase 2.

The flagship project is on track with final phase of project planned to be completed by June 2024 and then onwards commencement of gradual ramping up to reach planned peak production of 45,000 barrels of oil per day (bopd) and 10 MMSCMD of gas from the deep-water KG-DWN-98/2 Block, ONGC said.

Meanwhile, the Centre recently opened the ninth round of bidding under the Open Acreage Licensing Policy (OALP IX) for the oil and gas exploration and production (E&P) sector.

The government has been hoping that opening up more acreage for exploration will help boost India's oil and gas production, helping cut down the $222 billion oil import bill, according to reports.

ONGC is India's largest domestic crude oil and natural gas producer with proven reserves of 806.9 million metric tonnes of oil equivalent (mmtoe) as of March 2023.

ONGC and ONGC Videsh (OVL) aid the government's objective of ensuring energy security. OVL acts as India's upstream producer in international markets and helps in maintaining diplomatic and strategic ties with different countries.

ONGC had the largest exploratory acreage of 162,701 Km2 in India as on March 31, 2023. The company has been making continuous efforts to create a commercial play in newer and frontier areas.

In order to incorporate cutting-edge technologies into its aggressive exploration push in India’s deep-waters, ONGC is in talks with major international oil companies for collaborations.

Over the last few years, ONGC has brought more and more discoveries into the production stream quicker as well as made solid contributions to national E&P missions.

ONGC in its FY23 annual report said the company is anticipating stronger growth on the global front. The Sakhalin-1 Project production levels were back to normal levels of approx. 200,000 bopd and drilling activities have also resumed. Also Colombia’s CPO-5 Block was a significant drill bit success for the company in FY’23, with JV production levels of 19,000 bopd.

In terms of supplies, ONGC has a strong pipeline of projects: green-field projects as well as brownfield redevelopment schemes.

Further, it had been exploring opportunities in new energy as part of its transformation into a true energy behemoth.

ONGC is positioned well for further business avenues backed by steady cash flows and stand to a good position to consolidate from current status and continue to grow on a sustainable course, meeting the growing energy needs of the country while also adding value for all stakeholders, the company said.

Meanwhile, according to analysts at JM Financial Services, ONGC/Oil India’s December quarter (Q3FY24) net crude and gas realisation and sales volume could be largely flattish QoQ.

ONGC’s Q3FY24 EBITDA is likely to be flattish QoQ while Oil India’s Q3FY24 EBITDA could rise 7.1 per cent QoQ due to normalisation of opex, it said. 

The brokerage reiterates BUY on ONGC (revised target price of Rs 245) and Oil India (revised target price of Rs 430) given strong 6-8 per cent dividend potential and also because CMP is discounting only $60/bbl net crude realisation.

Shares of Oil India too surged nearly 5 per cent to Rs 391.75 on the BSE in Monday's intra-day trade. The stock had hit a record high of Rs 406.40 on December 20, 2023.