ONGC share price gains over 1% as analysts maintain positive outlook despite decline in crude prices

livemint.com:

Oil and Natural Gas Corporation Ltd ) gained up to 1.1% in intraday trades on Monday, the day when benchmark indices traded in the red. The Brent crude prices also have been softening. Analysts nevertheless maintain a positive outlook for upstream oil producers and expect stable net realisations for ONGC.

The rising production could provide some more upside to earnings while good dividend yield is an added advantage. ONGC share price had touched 52-week highs last week and is trading close to those levels. The decline in crude prices seen recently from highs though should have meant a decline in net realizations for the upstream oil producer, nevertheless introduction of windfall tax by the government has meant that oil producers as ONGC will see net oil realizations range bound but stable.

The windfall taxes introduced by the government last year are adjusted every fortnight depending on the crude oil movement. If crude prices rises, the windfall taxes also are raised and if crude prices decline, the windfall taxes also decline. This keeps net realizations for oil producers around similar levels.