– Higher crude oil prices due to geopolitical tensions. – Positive outlook for oil demand and lower supply estimates. – Potential for increased net realization for ONGC due to:Pragmatic government policies. New KG basin output exempt from windfall tax.
– Government reforms include:Floor price for gas. Yearly price hikes. Premium on gas from new wells. Higher price for new KG basin production. – These reforms are expected to significantly increase ONGC's earnings.
– Price reforms led to a rise in net realization per barrel of oil equivalent (boe) from $30 (pre-Covid) to $43 (FY22-23). – Ebitda per boe also increased from $21 to $32 (FY20-9MFY24). – Analysts expect this trend to continue through FY24-26.
– After a decline in production (FY14-24E), ONGC's domestic production is expected to grow again (FY24-26E). – This growth is driven by the start of production from a new KG field. – Jefferies predicts 3% and 6% CAGR (compound annual growth rate) for crude and gas production over FY24-26.
– Despite higher operating expenses, Jefferies expects production from the new KG basin to be profitable. – This addresses a major concern for investors.
– ONGC offers potential upside, but consider the risks:Volatile oil prices. Government policies and regulations. Debt levels. – Conduct your own research before investing.
– Track ONGC news, industry trends, and government policies. – Consider your investment goals and risk tolerance. – Diversify your portfolio to manage risk.