IGI Logo

Oil production outlook strengthens

OINL reported a beat on EBITDA at INR40.8bn (PLe: INR36.2bn; BBGe: INR37.1bn), aided by 11.4% YoY growth in oil production volumes and higher crude oil realizations, partly offset by an 8.5% decline in gas production. PAT came in-line with our est at INR28.7bn (PLe: INR27.6bn; BBGe: INR22.5bn), up 60.4% QoQ and 2.5x YoY. Management achieved its highest-ever daily crude production of 11,017mt/day on 3rd Aug’26, driven by well intervention and workover activities, and expects to sustain a quarterly oil production run-rate of ~1mmt in FY27. OINL expects to achieve 3.9mmt in FY27 and >4.0mmt in FY28. On gas production, OINL guided to reach 3.8bcm in FY28, with a significant jump expected from Q1FY29 once pipeline infrastructure is fully in place. Driven by this optimism and Q1FY27 performance, we increased our production expectations for oil and gas by 7%/2% to 3.8mmt/3.2bcm in FY27 and by 8%/4% to 4.0mmt/3.5bcm in FY28. We expect Brent crude at USD85.5/75.0/bbl in FY27/FY28. Maintain “Accumulate”, valuing the standalone business at 10x FY28E Adj EPS and adding the value of investments in NRL and other JVs, we arrive at a TP of Rs511 (earlier: Rs455)

Total production improves QoQ/YoY:

Oil production grew 6.6%/11.4% QoQ/YoY to ~1.0mmt in Q1FY27, 5.6% higher than our est. (PLe: 0.9mmt). Gas production came in 2.9% below our est at 0.8bcm, flat QoQ and declined 8.5% YoY due to periodic shutdowns at downstream customers, including BCPL, along with seasonal demand weakness as tea-garden consumption moderates. As a result, total volume grew 3.8%/1.6% QoQ/YoY to 1.7mmt.

Improved vol. with higher realizations drives Q1FY27 earnings:

Net sales stood at INR79.6bn, (PLe: INR75.6bn and BBGe:INR77.8), up 33.5% QoQ and 58.8% YoY led by improved production and higher crude oil and gas realizations. EBITDA beat estimates, improving 1.5x YoY to INR40.8bn (PLe: INR36.2bn; BBGe: INR37.1bn), led by higher revenue and lower other expenses & employee costs. Due to this, PAT exceeded street expectation but remained inline with our est at INR28.7bn (PLe: Rs27.6bn; BBGe: Rs22.5bn), up 2.5x YoY

Production outlook:

OINL expects to sustain a quarterly oil production run-rate of ~1mmt, targeting 3.9mmt or more in FY27 and 4.2mmt by FY29 from its main producing areas. On gas, key bottlenecks are being addressed - a 200-meter pipeline connecting to the national grid is expected to be ready in 2-3 months. Gas production is guided to reach 3.8bcm in FY28, with a significant jump expected from Q1FY29 once pipeline infrastructure is fully in place

Performance from NRL remained strong:

NRL's reported throughput declined to 791.2tmt in Q1FY27 vs 808.1tmt in Q4FY26 and 799.3tmt in Q1FY26. Reported Q1FY27 GRM stood at USD36.0/bbl, including ~USD2.0/bbl of inventory gains and net of OMC discounts, up sharply from USD5.0/bbl YoY. EBITDA rose to INR18.4bn from INR15.1bn in Q4FY26, while PAT grew to INR13.1bn from INR4.8bn in Q1FY26..

Please refer disclaimer at https://www.plindia.com/disclaimer/

SEBI Registration No. INH000000271