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Government policy holds the key…
�� Leading PSU Oil & Gas company
• Oil and Natural Gas Corporation (ONGC) is India’s leading
Integrated Oil and Gas Company, having presence across the
value chain. The company has presence across Exploration &
Production (E&P), Refining , Petrochemical, Power, LNG & is also
diversifying into new energy sources
• ONGC through its wholly owned subsidiary OVL, is operating in
14 countries across 33 projects
• In terms of capabilities, ONGC group produced 62 mtoe (million
tons of oil equivalent in FY11, and has refining capacity of 12.5
mmtpa through its listed subsidiary MRPL
• The company has the highest share of hydrocarbon acreage in
India. ONGC group 2P reserve and 3P reserve stands at 1426
mtoe and 1688 mtoe, respectively, as on FY11. In FY11, ONGC
accreted 83.6 mtoe of ultimate reserves (3P) in domestic operated
fields, which is the highest in last two decades
�� Going ahead
• Reforms by the Indian government in Oil & Gas sector would help
in reducing the subsidy burden of upstream companies which
was 38.75% in FY11. We expect the burden of upstream
companies to be capped at 33.33% going forward.
• ONGC has aggressive investment plans in exploration and
development activities over the next few years. As a part of its
strategy the company plans to invest ~| 30.000 crore in FY12E &
higher amount over the next few years in seismic, drilling and
capital projects. This is expected to result in increased oil & gas
production. Oil production is expected to increase to more than
28 mmt & natural gas production is expected to increase to more
than 72 mmscmd in FY13.
• ONGC’s strong balance sheet and healthy cash position which
would provide sufficient cushion for funding future expansion.
Valuation
Any reforms in the pricing of sensitive petroleum products would reduce
ONGC’s subsidy burden and improve its profitability. We believe low
valuations and further reforms in subsidy sharing mechanism would be
triggers for the stock, going forward. Also, ONGC’s large reserve base and
new discoveries would create value for investors.
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