ONGC shines in upstream pack: FY25 capex plan worth ₹35,000 crore triggers bullish upgrade; 19% return eyed over TP
₹327. Also Read: OPEC+ to support Brent at $80/bbl; ONGC/Oil India placed well on dividend pay, valuations‘’The company is expected to improve its earnings performance backed by increased production at KG 98/2 field, improved realisations, monetisation of discoveries, increased capex and potential adjustment of windfall tax.
Hence, we upgrade our rating on the stock to BUY with a revised TP of Rs. 327 based on the sum of-the-parts valuation,'' said Geojit Financial Services on ONGC.
-Capex target: The public sector undertaking (PSU) expects its capital expenditure (capex) to be in the range of ₹33,000- ₹35,000 crore for the current fiscal (FY25).
ONGC's capex for FY24 came at ₹37,000 crore. ONGC y made 11 field discoveries in FY24 and the reserve replacement was 1.15x.Monetising new discoveries, securing premium gas prices for production from nomination field, and potential improvement in net realisations for crude oil are expected to enhance ONGC's earnings, according to the brokerage.-Production levels: ONGC also plans to increase production at its KG 98/2 field to 45,000 barrels by Q4FY25 from the current 12,000 barrels.
It also expects to achieve a gas production rate of 10 million cubic meters per day by Q4FY25.‘’ONGC expects to raise its production from the current 39.45 mmtoe to ~47 mmtoe by FY27. It aims to take oil production to 22 mmt and gas production to about 25.5 bcm by FY27,'' said Geojit.
The ramp-up of the KG 98/2 is expected to boost the company’s oil and gas production in the coming years. Additionally, higher prices for its produce will support its performance as the windfall tax does not apply to KG 98/2.Also Read: ONGC stock jumps almost 5% as Jefferies sees over 50% upside; here's why the brokerage
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