Accumulate Oil & Natural Gas Corporation Ltd For Target Rs.260 by Prabhudas Liladhar Capital Ltd
Volume guidance maintained
Oil and gas production volumes (including JVs) came in inline with our est. at 4.9MMT and 4.9bcm (PLe: 5.0mmt and 4.9bcm), respectively. Crude realization came in at USD92.3/bbl (PLe: USD91.8/bbl). Revenue was inline with estimates at INR438.8bn (PLe: INR434.7bn; BBGe: INR441.5bn), down 5.6% QoQ and up 32.8% YoY. EBITDA was largely inline with estimates but declined 10.6% QoQ and increased 48.7% YoY to INR263.2bn (PLe: INR260.2bn; BBGe: INR268.3bn). PAT came above estimates at INR154.9bn (PLe: INR141.5bn; BBGe: INR136.7bn), declining 9.1% QoQ but growing 57.3% YoY, supported by higher other income and a lower tax. We maintain our FY27/FY28E standalone oil production estimates at 18.8/19.8mmt and gas production estimates at 19.4/20.4bcm, respectively. For FY29E, we estimate oil and gas production at 20.2mmt and 21.5bcm, respectively. Maintain 'Accumulate' rating with a revised TP of INR260 (earlier: INR250), based on 7x Sep’28E EPS for the standalone business, along with the value of investments.
Standalone oil production declines; Gas improves QoQ:
Standalone oil production, including condensate, declined 4.3% YoY and remained flat QoQ at 4.7MMT. Oil production from JVs stood at 0.2MMT, declining to 6.9% QoQ / 20.8% YoY. Gas production from own fields stood at 4.8bcm, increasing 1.7% QoQ but declining 1.6% YoY, while JV gas production declined 8.4% QoQ / 23.7% YoY to 0.1bcm. Consequently, total oil production (including JVs) remained flat QoQ/ declined 5.2% YoYto 4.9MMT, while gas production improved 1.5% QoQ and declined 2.1% YoY to 4.9bcm. OVL's oil production improved by 4.5% QoQ / 9.6% YoY to 1.9MMT, while gas production declined 3.8% QoQ to 0.7bcm but improved by 7.4% YoY.
Oil vol sales as a % of production declined YoY:
ONGC's oil sales volume declined 7.2% YoY / 1.0% QoQ to 4.2MMT, while JV oil sales declined 25.6% YoY but increased 4.5% QoQ to 0.2MMT. Oil sales as a proportion of production stood at 89.4% (Q1FY27: 90.1%), while the ratio for JVs improved to 94.3% from 84.0% in Q1FY27 and over 100% in Q2FY26. Gas sales-to-production ratio remaining broadly stable QoQ at 76.5% (Q1FY27: 76.4%; Q2FY26: 78.0%). While for JV’s it declined to 59.8% vs 63.2%/65.8% QoQ/YoY
Oil price realization improved:
Crude oil realisation from own fields declined 7.2% QoQ to USD92.3/bbl (Q1FY27: USD99.5/bbl) but remained higher by 37.1% YoY (Q2FY26: USD67.3/bbl). Gas realisation remained stable at USD7.0/mmbtu (Q1FY27: USD7.0/mmbtu; Q2FY26: USD6.8/mmbtu).
EBITDA/PAT above estimates – Standalone revenue increased 32.8% YoY but declined 5.6% QoQ to INR438.8bn as crude oil price moderated QoQ (PLe: INR434.7bn; BBGe: INR441.5bn). EBITDA was largely inline with estimates but declined 10.6% QoQ and increased 48.7% YoY to INR263.2bn (PLe: INR260.2bn; BBGe: INR268.3bn) due to higher other expenses which largely included INR15.6bn towards terminal excise duty receivable from DGFT and Fx loss of INR6.3bn, partly offset by lower opex of INR6.1bn, leading to net increase of INR6.0bn. PAT came above estimates at INR154.9bn (PLe: INR141.5bn; BBGe: INR136.7bn), declining 9.1% QoQ but growing 57.3% YoY, supported by higher other income and a lower tax
1HFY performance - In 1HFY27, Revenue and EBITDA improved 38.9% and 53.4% YoY to INR903.4bn and INR557.7bn amid high crude realizations YoY. Oil production volumes including condensate declined 5.4% YoY to 9.9mmt while gas production volumes decliedn 2.2% to 9.8bcm. Crude oil realization stood at USD95.9/bbl up 43.7% YoY.
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