ONGC Share Price Rises! Four Factors That Suggest Another 40% Increase

ONGC share price surges 5% after Jefferies initiates coverage with a "Buy" rating and a 40% upside target.

ONGC Share Price Jumps! Jefferies Sees Huge Upside (India)

– 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.

Why is ONGC Stock Up? Rising Oil Prices & More

– 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.

Gas Price Reforms to Boost ONGC 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.

Price Reforms Lead to Profitability Growth

– 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.

ONGC Production Growth on the Horizon

– Despite higher operating expenses, Jefferies expects production from the new KG basin to be profitable. – This addresses a major concern for investors.

New KG Basin Production Expected to be Profitable

– ONGC offers potential upside, but consider the risks:Volatile oil prices. Government policies and regulations. Debt levels. – Conduct your own research before investing.

Should You Invest in ONGC? Do Your Research!

– Track ONGC news, industry trends, and government policies. – Consider your investment goals and risk tolerance. – Diversify your portfolio to manage risk.

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