Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ONGC
Reuters: ONGC.BO Bloomberg: ONGC IN Exchange: BSE Ticker: ONGC
Focusing on overseas assets
Factoring OVL valuation, domestic assets trading cheap
ONGC Videsh Ltd (OVL) accounts for 29% of ONGC’s reserves and 16% of its
production. Based on Wood Mackenzie’s production estimates, we assess the
value of OVL at INR59/share. With FY12e net cash and investments of
INR38/share, ONGC's current market price factors only INR164/share or US$31bn
for its domestic assets. This implies ONGC’s domestic assets are trading at FY12e
PER of 6.6x, PBV of 1.3x and EV/boe of US$4.5, which is more than a 50%
discount to regional peers. Reiterating Buy.
ONGC Videsh (OVL)’s key assets
In FY11, with production of 66m boe, OVL accounted for 12% of ONGC’s net
profit. More importantly, with 2P reserves of 2.9bn boe (67% oil), OVL contributes
29% to ONGC’s consolidated reserves. GNOP in Sudan, Carabobo in Venezuela,
and Imperial and Sakhalin in Russia are OVL’s four key assets, accounting for 81%
of its 2P reserves and 49% of its production. Based on estimates by Wood
Mackenzie (WM), production from these blocks is likely to increase by 18% for oil
and over 100% for gas during CY11-14. WM expects Carabobo-1 to start
producing oil from CY15 and ramp-up to its peak production of 400k bpd in CY20,
when oil production from these four blocks should increase by 130%.
OVL: the road ahead – contours still hazy on a deal with Sistema
In December 2010, ONGC signed a framework agreement to consider
opportunities for a potential transaction involving Sistema's majority stake in JSC
Bashneft and a 49% stake in RussNeft and OVL’s Imperial Energy. As per media
reports (Economic Times), after the merger, OVL will have a 25% stake in the new
entity. Assuming this deal goes through, OVL’s share of reserves in the JV would
be 1.1bn bbls compared to Imperial Energy's 2P reserves of 798m bbls, and its
share of production would be ~87k boepd as against Imperial Energy's production
of ~20k bpd.
DCF-based value of INR350; uncertain subsidy sharing the key risk
We value ONGC at INR350 based on DCF, assuming 12.9% WACC based on DB’s
CoE assumptions for India (risk-free rate 6.7% and risk premium 8.1%) and beta of
0.78. Key risks are vagaries in government policy on fuel pricing and subsidy, a
further increase in oil prices and fall in oil & gas production
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ONGC
Reuters: ONGC.BO Bloomberg: ONGC IN Exchange: BSE Ticker: ONGC
Focusing on overseas assets
Factoring OVL valuation, domestic assets trading cheap
ONGC Videsh Ltd (OVL) accounts for 29% of ONGC’s reserves and 16% of its
production. Based on Wood Mackenzie’s production estimates, we assess the
value of OVL at INR59/share. With FY12e net cash and investments of
INR38/share, ONGC's current market price factors only INR164/share or US$31bn
for its domestic assets. This implies ONGC’s domestic assets are trading at FY12e
PER of 6.6x, PBV of 1.3x and EV/boe of US$4.5, which is more than a 50%
discount to regional peers. Reiterating Buy.
ONGC Videsh (OVL)’s key assets
In FY11, with production of 66m boe, OVL accounted for 12% of ONGC’s net
profit. More importantly, with 2P reserves of 2.9bn boe (67% oil), OVL contributes
29% to ONGC’s consolidated reserves. GNOP in Sudan, Carabobo in Venezuela,
and Imperial and Sakhalin in Russia are OVL’s four key assets, accounting for 81%
of its 2P reserves and 49% of its production. Based on estimates by Wood
Mackenzie (WM), production from these blocks is likely to increase by 18% for oil
and over 100% for gas during CY11-14. WM expects Carabobo-1 to start
producing oil from CY15 and ramp-up to its peak production of 400k bpd in CY20,
when oil production from these four blocks should increase by 130%.
OVL: the road ahead – contours still hazy on a deal with Sistema
In December 2010, ONGC signed a framework agreement to consider
opportunities for a potential transaction involving Sistema's majority stake in JSC
Bashneft and a 49% stake in RussNeft and OVL’s Imperial Energy. As per media
reports (Economic Times), after the merger, OVL will have a 25% stake in the new
entity. Assuming this deal goes through, OVL’s share of reserves in the JV would
be 1.1bn bbls compared to Imperial Energy's 2P reserves of 798m bbls, and its
share of production would be ~87k boepd as against Imperial Energy's production
of ~20k bpd.
DCF-based value of INR350; uncertain subsidy sharing the key risk
We value ONGC at INR350 based on DCF, assuming 12.9% WACC based on DB’s
CoE assumptions for India (risk-free rate 6.7% and risk premium 8.1%) and beta of
0.78. Key risks are vagaries in government policy on fuel pricing and subsidy, a
further increase in oil prices and fall in oil & gas production
No comments:
Post a Comment