ONGC, Oil India share price movement

Oil and Natural Gas Corporation (ONGC) and Oil India shares moved higher by 2 per cent each on the BSE in Tuesday’s intra-day deals on rising oil prices as renewed conflict between the US and Iran reignited supply concerns from the region.

Share price of Oil India rose 2.3 per cent to ₹492.95, while ONGC gained 2 per cent at ₹235.95 on the BSE in an otherwise weak market. In comparison, the BSE Sensex was down 0.16 per cent at 76,834 at 01:58 PM.

Why are Oil India, ONGC are outperforming in a weak market?

The US strikes on Iranian targets and Tehran’s retaliatory attacks raised tensions, while President Trump threatened further action against Kharg Island. 

WTI Crude Oil prices surged more than 3 per cent after US forces struck Iranian rocket launchers near the Strait of Hormuz. Iran retaliated with missile attacks on US bases in Jordan, reigniting fears that renewed tensions could disrupt crude shipments through the critical waterway, Axis Securities said in its commodities report.

According to a Reuters report, oil prices gained on Tuesday as the resumption of fighting between the US and Iran in the Middle East renewed fears of supply disruptions from the world's key crude-producing region.

In the previous session, Brent closed up 2.7 per cent, at one point reaching its highest since August 25, and WTI settled up 2.8 per cent, touching its highest since August 21.

On Monday, US President Donald Trump threatened further strikes against Iran following the first exchange of direct attacks between the countries in a month on Sunday, raising tensions in a conflict that recently shifted into an economic standoff, Reuters reported.

Brokerages view on ONGC, Oil India

As per reports, ONGC plans to make a major push into deepwater and ultra-deepwater exploration, with an investment of around ₹1 trillion over the next five years and plans to drill 87 wells by FY31. 

The company aims to make new discoveries to arrest the decline in India’s domestic crude oil and natural gas production, with the government’s ₹84,084 crore Samudra Manthan programme also supporting offshore exploration. ONGC plans to drill 8 wells in FY27, 10 in FY28, 20 in FY29, 22 in FY30 and 27 in FY31. 

Meanwhile, production from ONGC’s KG 98/2 field declined to around 20,000 barrels per day from its targeted peak of 35,000 bpd, highlighting the need for new discoveries and enhanced exploration efforts, ICICI Securities said in a note.

Further, ONGC Chairman Arun Kumar Singh said the company is well positioned to handle crude oil price fluctuations in the $60–90 per barrel range, as its integrated upstream and downstream businesses help offset the impact of changing oil prices.

Samudra Manthan would definitely help both ONGC and Oil India in the long run. However, it may be noted that 67 per cent of ONGC’s total production comes from fields that are witnessing structural decline in production. Thus, only time will tell whether the scheme will result in any growth, analysts at PL Capital said in an oil & gas sector report. Analysts highlight both ONGC and Oil India as potential long-term investment bets, should the scheme result in overall growth in production.

Analysts at JM Financial Institutional Securities maintain a 'BUY' rating on ONGC with unchanged target price of ₹300 based on its FY28E onwards Brent crude price assumption of $70/bbl (while current market price is discounting ~$60/bbl of net crude realisation due to fear of windfall tax; the brokerage firm do not see a risk of windfall tax as the government is serious about incentivising global oil & gas majors to boost domestic exploration); and likely oil and gas output growth over the next two–three years driven by Western Offshore, KG DW 98/2 and Mumbai High blocks.

ONGC is also a solid dividend play (4–5 per cent). The stock trades at 6.2x FY28E consolidated EPS and 0.7x FY28E BV. Disclaimer: Views and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers' discretion is advised.