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Motilal Oswal Report
We met with the management teams of Oil and Natural Gas Ltd., GAIL India Ltd. and Oil India Ltd. in Delhi during December 06, 07. 2023. Key takeaways:
ONGC/Oil India remain confident of 20% higher slope (i.e., 10% + 2%) for gas prices applicable on production increase obtained via improved oil recovery/enhanced oil recovery techniques (we assume flat gas price realisations for now).
ONGC has reiterated its commitment to raise production to 50 million metric tonne or oil equivalent by FY28; Oil India expects IndraDhanush Gas connectivity (by March 2024) to lead to gas production growth in high-teens in FY26 on YoY basis (Hindustan Oil Exploration Company Ltd. is also a beneficiary).
GAIL is positive about the transmission volume outlook, though there has been further administered price mechanism gas de-allocation in recent months. Efforts to bring down gas costs to below $10/million metric British thermal unit for the petchem segment continue even as domestic polymer premium remains weak due to new supply from HPCL-Mittal Energy Ltd.
Overall we maintain our 'Buy' rating on ONGC, Oil India and GAIL given inexpensive valuations and improving volume growth outlook.
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