ONGC gains 5% as ONGC Videsh makes fourth commercial oil find in Colombia

Shares of Oil and Natural Gas Corporation (ONGC) surged early 5 per cent to Rs 94 on the BSE in the early morning deals on Monday after the company announced that its overseas subsidiary has smade a "significant strike of oil" in Columbia. This is the fourth commercial find in the block by ONGC Videsh.

The stock of the state-owned oil exploration and production company was trading at its highest level since March 2020. At 09:25 am, it was trading at Rs 93.15, up 4 per cent, as compared to a 0.15-per cent gain in the S&P BSE Sensex. Around 1 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

"ONGC Videsh Limited (OVL), the wholly owned subsidiary and overseas arm of ONGC, has made a significant strike of oil in its onshore block CPO-5, Colombia, in Llanos Basin. OVL is Operator in the block with 70 per cent stake along with its Partner Geopark Ltd. (30 per cent stake) an independent oil and gas company focussed in Latin America," the company said in a press release. READ RELEASE HERE

CPO-5 is a large onland block covering an area of 1,992 SKM and offers multiplay Exploratory and Appraisal opportunities. "The company now plans to drill more wells to explore other plays in the block in immediate future. OVL is also undertaking additional 3D Seismic data to map more drillable prospects in the other sectors of the block," it said.

Analysts at Motilal Oswal Financial Services believe that ONGC is expected to grow its gas production in FY22, with efforts to arrest the decline in oil production from age-old fields (accounting for 60–70 per cent of total oil production). The company, they say, is likely to generate free cash flow (FCF) of Rs 38,000 crore (translating to a FCF yield of ~33 per cent), with a dividend yield of ~3-5 per cent in FY21-23E.

"ONGC has performed well under the pandemic and we expect an improvement going ahead with October-March period (H2FY21) profitability expected to be better. The worst seems to be over now unless there is a second wave of Covid-19," analysts at Emkay Global Financial Services said in a September quarter result update.