Accumulate Oil & Natural Gas Corporation Ltd For Target Rs.297 by Prabhudas Liladhar Capital Ltd
Moving towards a gas-led portfolio
Revenue improved 13.9% QoQ and 2.7% YoY to INR359.3bn (PLe: INR345.2bn; BBGe: INR362.1bn), primarily driven by higher crude oil realizations, partly offset by lower sales volumes. Total standalone sales volumes declined 4.0% QoQ and 3.5% YoY, while crude oil realization increased to USD78.3/bbl (+27.1% QoQ; +6.2% YoY). Adj. EBITDA (ex GST provision) stood at INR186.1bn, up 7.4% QoQ but down 2.1% YoY, impacted by higher employee and other expenses. Adj. PAT came in at INR73.0bn, down 17.2% QoQ while up 6.0% YoY. ONGC plans to drill ~500 wells, including ~400 developmental wells. Management indicated future production volumes will increasingly tilt toward gas, supported by a rising contribution from NWG volumes. Given the continued weakness in recent production trends, we maintain conservative production assumptions. We build in FY27 standalone production at 19.8mmt for oil and 20.1bcm for gas (previous: oil 20.0mmt; gas 20.6bcm). For FY28, we estimate oil production of 20.6mmt and gas production of 21.2bcm, reflecting modest improvement as key projects gradually ramp up and become operational. We maintain “Accumulate” rating with a revised target price of INR297 (earlier: INR309) based on 9x FY28E EPS for the standalone business, along with the addition of investment value.
Standalone production volume declines; OVL remains steady QoQ:
Oil production inc. condensate from own fields in Q4FY26 stood at 4.7mmt, down 3.2%/5.7% QoQ/YoY. Share of oil JVs stood at 0.3mmt, down 5.9%/10.0% QoQ/YoY. Gas production from own fields stood at 4.8bcm, down 4.1%/2.3% QoQ/YoY. Gas production from JVs stood at 0.1bcm, down 6.7%/19.2% QoQ/YoY. Total oil production (incl JVs) declined 3.4%/5.9% QoQ/YoY to 4.9mmt, while gas production (incl JV) declined 4.2%/2.7% QoQ/YoY to 4.9bcm. For OVL, oil and gas production in Q4FY26 stood at 1.7mmt (up 2.1% QoQ and down 6.4% YoY) and 0.8bcm (up 11.3% QoQ and down 5.5% YoY).
Oil price realization improved:
Crude oil realization from own fields stood at USD78.3/bbl vs USD61.6/bbl in Q3FY26 and USD73.7/bbl in Q4FY25. Gas price realization for own fields stood at USD6.4/mmbtu vs USD6.6/mmBtu in Q3FY26 and USD6.5/mmBtu in Q4FY25.
Oil and gas production declined YoY flat in FY26:
Oil and gas production, incl JVs declined 1.9% and 1.1% YoY respectively, while OVL oil and gas production volumes fell -4.9% and -8.3% YoY, respectively. Oil realization averaged USD68.3/bbl vs USD76.9/bbl YoY. Adj. EBITDA and Adj. PAT stood at INR728.3bn and INR348.5bn, respectively (-2.7% and -7.0% YoY).
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