Target: ₹200

CMP: ₹155.85

Oil and Natural Gas Corporation (ONGC) reported EBITDA of ₹20,410 crore (+28% YoY, +9% QoQ), in line with our estimates. Oil realisation stood at $76.7/bbl (after taking into effect 3Q windfall tax). Crude oil and gas sales stood at 4.7mmt and 4.2bcm, respectively, both in line with our estimates.

First oil from the KG Basin is expected in May/Jun’23. Incremental production guidance stands at 1.9mmt of oil and 2.8bcm of gas in FY24 and 2.2mmt and 3.8bcm in FY25. At the peak, incremental production could be 45kbopd and 12mmscmd in FY25.

The windfall tax stood at ₹5,050/mt in Feb’23 till date from ₹23, 250/mt in Jul’22, in line with the decline in oil prices. However, with no end to the windfall tax in sight, we have already extended its effect to 4-QFY23, FY24 and FY25 in our note ‘Top Pick 2023’. We have not changed our Brent assumptions for FY24/FY25 (USD90/bbl), with net realization at USD70/bbl (after taking into effect the windfall taxes).

With the in-line 3Q performance, the standalone business does not warrant a change in our estimates for FY23/FY24/FY25. We increase our EBITDA/EPS estimates by 5 per cent/13 per cent for FY24 and by 7 per cent/12 per cent for FY25, due to investments ONGC has made in HPCL, MRPL and PLNG.