Oil India surges 5%, hits 52-week high on rising oil prices, strong outlook

The company's prospects remain strong over FY24E / FY25E driven by steady increase in oil & gas output, and greater monetisation opportunities in gas via the imminent NE grid commissioning

Shares of Oil India hit a 52-week high of Rs 305 as they rallied 5 per cent on the BSE in Thursday's intra-day trade on the back of heavy volumes amid rising crude oil prices.

The company's prospects remain strong over FY24E / FY25 driven by steady increase in oil & gas output (~4 per cent growth p.a.), greater monetisation opportunities in gas via the imminent Northeast (NE) grid commissioning, resumption of Numaligarh Refinery (NRL) operations from Q2, and steady realisations for both oil & gas, according to analysts.

The stock of the state-owned oil exploration and production company surpassed its previous high of Rs 296.95, touched on August 23, 2023. It had hit a record high of Rs 334.98 on September 9, 2014.

Trading volumes on the counter nearly doubled with a combined 3.3 million equity shares changing hands on the NSE and BSE. In comparison, the S&P BSE Sensex was up 0.04 per cent at 66,142 at 09:37 AM.

US oil price jumped nearly $1 a barrel on Thursday to its highest level in more than a year as a steep drop in crude stocks in the United States added to worries of tight global supplies from OPEC+ cuts led by Saudi Arabia, Reuters reported.

Analysts at ICICI Securities expect a tighter demand-supply balance by H2-FY24 for Brent crude.

"However, due to the additional 'windfall' tax, net realisations seem capped at $76-77/bbl for the next 12-18 months. Additionally, with reduction in the domestic gas price by $2/mmbtu, gas prices should average $6.5/mmbtu for FY24E and FY25E. While these prices are lower vs FY23, we note that they are well above long-term historical averages for OIL," the brokerage firm had said in Q1-FY24 result review report.

Besides, the implementation of the Kirit Parikh Committee's recommendations from April’23 has provided much-needed respite to upstream companies as they had to sell gas below the cost of production for quite a long time, according to analysts at Motilal Oswal Financial Services. 

The brokerage firm believes oil prices could remain at around $90/bbl level in FY25 amid active production management by OPEC+ leading to supply tightness during the second half of fiscal year.

Oil India is engaged in exploration, development and production of crude oil and natural gas, production of LPG, transportation of crude oil & natural gas, and generation of renewable energy.

The company is a leading E&P Operator in the Northeast. Assam Shelf is a prolific onshore basin with a considerable Yet-To-Find (YTF) potential. Towards this endeavour, the company has been consolidating its acreage position through OALP regime, and the exploration activities would be intensified both in Mining Lease areas and Exploration License areas.

The company has also identified a few key areas for fast-track development in Assam and Rajasthan, and plans are already in hand to enhance level of production in near future. During the financial year 2022-23 (FY23), the company drilled 15 (Fifteen) wells in these thrust areas, and also generated 68 number of new locations for drilling in the coming years.

Oil India, in its FY23 annual report, had said the company has undertaken measures for engagement of Production Enhancement Contracts, adaptation of new technologies, maximizing recovery from existing fields, expedite development plans, monetization of Non-Producing PMLs and un-monetized discoveries etc. for enhancing oil and gas production.