ONGC - Auction Update

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The sale of ONGC shares is part of the Indian government's divestment programme and other state-run companies in which it has to reduce its holding includes NFL, Neyveli Lignite, RCF, STC, Coal India, NMDC because of "minimum public shareholding guidelines".

ONGC is one of the faster growing E&P stocks in Asia with impressive 3-year production CAGRs of 7% in oil and 6% in gas. It is also attractive at PE of 10.8 while Asian Peers are quoting at 17.5 PE. ONGC is quoting at deep discount. In EV/BOE multiple stock is less than half of its global peers .We are positive for the stock.

Company Description

It is one of the largest Asia-based oil and gas exploration and production companies, and produces around 77% of India's total crude oil production (and around 30% of total demand) and around 81% of natural gas production. ONGC is one of the largest publicly traded companies by market capitalization in India and the largest India-based company measured by profits. ONGC was founded on 14 August 1956 by the Indian state, which currently holds a 74.14% equity stake. Post auction GOI holding will come down to 69%. It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins of India, and owns and operates over 11,000 kilometres of pipelines in the country. In 2010, it was ranked 18th in the Platts Top 250 Global Energy Company Rankings and 413th in the Fortune Global 500.

During the fiscal year ended March 31, 2011 (fiscal 2011), the Company had a crude oil production of 34.04 million metric tons and natural gas production of 28.02 million metric tons. On April 16, 2011, the Company’s subsidiary ONGC Videsh Limited (OVL), added one asset in its portfolio of exploratory assets by signing agreements with KazMunaiGas (KMG), the national oil company of Kazakhstan for acquisition of 25% participating interest in Satpayev exploration block. Its subsidiaries include ONGC Videsh Limited (OVL), Mangalore Refinery & Petrochemicals Ltd., ONGC Nile Ganga BV (ONGBV), ONGC Nile Ganga (Cyprus) Ltd., Jarpeno Limited, Imperial Energy Corporation Plc, Imperial Energy Limited and Imperial Energy Kostanai Limited