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ICICI Securities Report
We recently met Oil and Natural Gas Corporation Ltd.'s management to get a sense of their business and future prospects. Presented below are the key takeaways:
Brent crude prices have moderated to $81/barrel of oil levels (last one-month average) driven by continued global economic concerns and the resurgence of Covid in China as they have loosened lockdown restrictions.
However, despite windfall tax impact, net realisation for ONGC may stay at $75/bbl levels, which is $18/bbl higher than the average realisation over FY15-22.
At our FY23E and FY24E estimates of brent crude $90/bbl levels, we see ONGC's net realisation remaining at ~$75/bbl – well above its historical averages.
ONGC's memorandum of understanding targets (standalone, excluding joint venture share) of 21 million tonne (up 8% YoY) of oil and 24.3 billion cubic metre of gas (up 18% YoY) are ambitious and predicated on the commencement of KG 98/2 asset after two years plus of delays.
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