Oil and Natural Gas Corporation Limited (ONGC) shares surged 2.12% today, continuing their upward momentum from the previous session. The rally is attributed to favorable updates from global brokerages, including Jefferies and CLSA, coupled with a significant production enhancement partnership announced by the company.
Key Brokerage Insights:
Jefferies:
- Production Growth: ONGC’s increasing production levels are expected to drive profitability.
- Pricing Reforms: Structural reforms in pricing to significantly boost financials by FY26.
- Valuation: Jefferies noted that ONGC is trading at attractive valuations, making it a preferred stock pick.
CLSA:
- Upgraded ONGC to a ‘High Conviction Outperform’ rating, with a target price of ₹360 per share, implying a 41.2% upside from the current market price.
- Production Growth: Eastern offshore ramp-up projected to elevate oil production by 10% and gas output by 20% by the end of 2025.
- Gas Realizations: Enhanced yields expected to boost overall realizations.
- Windfall Tax Removal: Potential policy changes could improve crude oil realizations beyond $75/bbl.
- Valuation and Dividend: ONGC trades at a discount to historical averages, offering a lucrative dividend yield of 6%.
Strategic Partnership for Mumbai High Field
ONGC has partnered with BP Exploration (Alpha) Ltd., a subsidiary of BP Plc, to revitalize its Mumbai High Field. The collaboration is aimed at leveraging advanced recovery technologies to enhance domestic production from this mature yet vital asset.
- Mumbai High Field Overview: Discovered in 1974, the field remains a cornerstone of ONGC’s operations.
- International Competitive Bidding (ICB): BP Exploration was selected after a rigorous process.
- Impact: The partnership is expected to boost oil and oil-equivalent gas (O+OEG) production by up to 60% over the next decade.
Market Impact:
The stock’s upward trajectory reflects investor confidence in ONGC’s growth potential, supported by production ramp-ups, policy tailwinds, and attractive valuations. As of 9:15 AM, ONGC shares were trading at ₹269.07 on the NSE, with analysts predicting further upside.
