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Positional Call: Buy ONGC for upside of 14% in 3 months

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Investment Rationale

Largest producer of crude oil and natural gas in India, contributing around 70 % of Indian domestic production.

OPEC & NON OPEC DEAL- Deal to cut oil production

Oil prices shot up over 4 % to their highest level since 2015 after OPEC and other producers over the weekend reached their first deal since 2001 to jointly reduce output in order to rein in oversupply and prop up the market.

Producers from outside OPEC, led by Russia agreed to reduce output by 558,000 bpd, short of the initial target of 600,000 bpd but still the largest contribution by non-OPEC ever . Of that, Russia will cut 300,000 bpd. Russia said its reduction would be gradual, adding that by the end of March Russia would be producing 200,000 bpd less than its October 2016 level of 11.247 million bpd. Russian output would fall to 10.947 million bpd after six months. That followed OPEC's deal to cut output by 1.2 million barrels per day for six months from Jan. 1, with top exporter Saudi Arabia cutting around 486,000 bpd in a bid to end overproduction that has dogged markets for over two years and pushed the economies of many oil exporting countries into crisis. OPEC's decision to cut production has removed a lot of downside risk for 2017. OPEC countries could boost prices and ease the pain on their budgets without immediately triggering a massive surge in new oil investment that would lead to another glut and crash.

As on 30th Sept. 2016, total crude oil production including IV was up 0.8% Q-O-Q and decreased 2.8% Y-O-Y to 6.39 MMT. Crude oil sales volume stood at 5.86 MMT down 0.2% Q-O-Q and gas sales at 4.46 BCM up 7.6% Q-O-Q. Total natural gas production including IV increased 5.7% Q-O-Q and 1.8% Y-O-Y to 5.81 BCM.

VAP production volumes increased 5.33% Q-O-Q to 0.798 MMT in Q2FY17. Highest contribution was from LPG which stood at 358 mn tons as compared to 343 mn tons in Q1FY17. Naphtha contributed 286 mn tons as compared to 271 mn tons in Q1FY17.

Company has crossed its daily production target of 16,200 tones per day and accordingly revised its annual goal upward to 5.9 million tones for this fiscal. Daily production of the company has already touched 16,300 tones compared to 15,300 tones in August 2015. company gave a mission target for production to all its assets across the country for the current financial year and all will achieve it by the end of the fiscal.

In last fiscal, our production in Assam was 0.9 million tones. This year, we will reach the figure of one million tones. The average production of Assam asset was 2,250 tones a day a year earlier. It has already crossed 2,350 tones per day. By January, company expects to achieve the target of 2,400 tones a day to Assam asset.

Roll out new 'basin' in Agartala by 2017- Company will set up a new 'basin' in Agartala by the end of next year as it looks to focus more on exploration of oil and gas in the North-East region.

Awaits DGH nod for $5-billion KG-D5 gas development plan to produce oil and gas discoveries in its Bay of Bengal block KG-DS, had on March 28 approved an investment of USD 5,076.37 million for developing Cluster-II discoveries to flow natural gas from from June 2019 and oil by March 2020.

ONGC Videsh & PDVSA sign agreement for payment of dividend and financing of San Cristobal project

Along with that, company also signed agreements to practically outsource production of oil and gas from its ageing fields in Gujarat and Assam to international service providers Schlumberger and Halliburton. Additionally, company is seeking a 15-year extension of its license to operate an oil block in Sudan after the initial contract expired last month.

New short term subsidy sharing formula; soft crude oil prices will result in lower gross under recoveries on kerosene, increasing production from OVL combined with OPEC & Non OPEC deal would enhance profitability & long term economic viability of the company in coming years. Therefore, we recommend to BUY the script.


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RUDRA is one of the growing & dynamic brokerage houses with a strong presence in the Retail and HNI broking segment. With over 25 years of experience and lead by a team with outstanding managerial acumen, RUDRA is a professionally managed company supported by over 100 professionals, including Chartered Accountants, MBAs and other senior executives. RUDRA can thereby cater to its clients' short-term as well as long-term financial needs through a comprehensive bouquet of investment services. RUDRA offers a diverse range of financial services, including institutional and retail brokerage of Equity, Currency, Commodities, Derivatives, Online Trading, Depository Services, Fixed Deposits, IPOs and Mutual Funds Distribution, and Wealth Advisory & Research. RUDRA is looking to become one of the biggest broking houses. RUDRA Securities Limited, is a member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited, MCX Stock Exchange, and Depository Participant of Central Depository Services (I) Limited. RUDRA can be approached online at


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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