Oil India stock rallies 5%, hits new high ahead of 1:2 bonus; ONGC up 2%

The board of Oil India has fixed Tuesday, July 2, 2024 as record date to determine the eligibility of shareholders to receive bonus shares in the ratio of 1:2.

Shares of Oil India hit a new high of Rs 743.30, as they rallied 5 per cent on the BSE in Friday’s intra-day trade ahead of bonus shares in the ratio of 1:2 i.e. 1 (one) equity share for every 2 (two) existing equity shares held in the company. The board has fixed Tuesday, July 2, 2024 as record date to determine the eligibility of shareholders to receive bonus shares.

At 10:26 am; the stock of state-owned oil exploration & production (E&P) company was trading 4 per cent higher at Rs 734.30 on the BSE. In comparison, the BSE Sensex was up 0.30 per cent at 79,484. The average trading volumes at the counter jumped 1.5 times with a combined 3.11 million shares changing hands on the NSE and BSE.

 

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

The government of India’s plan to more-than-double its exploration area of oil and gas to 0.5 million sq. km. by 2025 and to 1 million sq. km. by 2030 with a view to increase domestic output, which shall have far reaching ramifications for the energy landscape of the country. As a company with E&P as its core business, this will bring enormous opportunities in future to play a key role in enhancing energy security for the country.

By 2030, India plans green hydrogen production capacity of at least 5 MMT (Million Metric Tonne) per annum with an associated renewable energy capacity addition of about 125 GW. The company has drawn up plans for entering into compressed Biogas (CBG), CBM & Biogas.

Elara Capital has a ‘Buy’ rating on Oil India with a target price of Rs 823 per share on higher FY26E EV/EBITDA multiple assumption at 7.0x (from 6.0x) on expectations of strong production growth in the next five years. The brokerage firm assumes long term crude at $76/bbl and APM gas at $7.5/mmbtu (unchanged).

Analysts expect Oil India to maintain strong production growth, at least in the next five years, given the most favorable oil & gas prospects for the AssamArakan basin amongst all basins, pan-India, as per Directorate General of Hydrocarbons, as also demand boost led by the upcoming Indradhanush Gas Grid, Guwahati-Barauni gas pipeline (by mid-CY24) and Numaligarh Refinery capacity expansion (by 6mn tonnes by Q3FY25). Oil India has 1,372mmboe proven reserves, and only 28 per cent of the reserves are developed versus ONGC’s 63 per cent, implying that a massive 72 per cent is undeveloped (with nil exploration risk), the brokerage firm said in the stock update.

Meanwhile, Brent crude price around $80-85/bbl is a sweet spot for ONGC/Oil India, as it ensures improved visibility for net crude realisation of ~$75/bbl by eliminating the risk of ad hoc fuel subsidy burden, according to analysts at JM Financial Institutional Securities.

Shares of ONGC were trading 2 per cent higher at Rs 274 on the BSE. The stock had hit a 52-week high of Rs 292.95 on May 3, 2024.