ONGC rallies 7% on higher oil prices; stock up 29% so far in February

Goldman Sachs Group Inc. has predicted crude oil prices could advance above $70 in the coming months

Shares of Oil and Natural Gas Corporation (ONGC), on Tuesday, hit a fresh 52-week high of Rs 113.95 after rallying up 7 per cent on the BSE on the back of rising oil prices. Besides, Goldman Sachs Group Inc. predicted prices could advance above $70 in the coming months.

Thus far in the month of February, the stock of the state-owned oil exploration company has rallied 29 per cent, as compared to 8.5 per cent rise in the S&P BSE Sensex.

Analysts at Emkay Global Financial Services reiterate ‘Buy’ rating and ‘Overweight’ stance on ONGC with target price of Rs 130 per share, on the back of buoyant oil prices and potential overhaul in nominated block (APM) gas pricing.

“Brent prices have recovered to USD65/bbl as demand recovery and strict output-cut compliance by OPEC+ has led to a supply deficit and inventory destocking. Further, large Covid-19-led stimulus announcements and recent extreme cold conditions in Texas affecting operations have also weighed in. With the arrival of summer driving season and personal mobility preference, higher gasoline demand should support prices ahead. For every USD5/bbl increase in oil realization, ONGC’s EPS would grow by Rs 3 per share,” the brokerage firm said in company update.

ONGC's management has remained upbeat on the government agreeing to remunerative gas pricing, which should at least cover the $3.5-3.7/mmbtu cost of production. Every $1/mmbtu rise in APM rate implies Rs2.6/sh EPS increase for the company, it said.

The brokerage firm further said that ONGC has also indicated 98/2 output ramping up from current 0.3mmscmd to around 3mmscmd by May’21, 8- 9mmscmd in FY23 and 15mmscmd peak by FY24. Other positive factors include improving OPaL performance, consolidation of downstream entities OMPL-MRPL-HPCL and subsequent synergies, foray into gas marketing (cleaner sunrise sector) and GST in gas.

At 10:50 am, ONGC was trading 6 per cent higher at Rs 113 on the BSE, as compared to 0.97 per cent rise in the S&P BSE Sensex. A combined around 42 million equity shares have changed hands on the counter on the NSE and BSE, so far.