Brokerages maintained a positive stance on Oil and Natural Gas Corporation (ONGC) after the government announced higher premiums for new gas wells.
What Happened: ONGC said on Monday the Ministry of Petroleum and Natural Gas announced a 20% premium on the gas produced from new wells or interventions.
Previously, the domestic gas price (APM) was fixed at 10% of the Indian crude basket price. The new premiums apply to the oil fields of ONGC and Oil India.
ONGC currently has two projects in its pipeline with the Daman Upside Development project and the integrated development of four contract areas under DSF-II, with a combined cost of around ₹13,800 crore.
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Brokerage Views: Jefferies maintained a "buy" call and raised the target price to ₹420, increasing consolidated earnings per share estimates by 2% to 3% for FY26 and FY27, respectively.
According to the brokerage, ONGC’s valuation remains favourable with the stock trading at a discount to Nifty 50. The production ramp up of KG Basin and removal of upstream cess are upside triggers, the research firm added.
Citi maintained a "buy" call with a target price of ₹350. The notification would apply to 10% of ONGC's current gas production, which will rise to 20-25% of the production in 2-3 years, the research firm noted.
ONGC's blended APM price realisations could rise from $6.5 per metric million British thermal unit in FY24 to $7.5 per metric million British thermal unit in FY27.
The brokerage firm said that every $1 per metric million British thermal unit benefits consolidated earnings per share by 7%-8%.
Price Action: Shares of ONGC rose up 0.10% to ₹341.65 on Tuesday morning.
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