Motilal Oswal: ONGC - Volumes Back To Normal Levels; KG Basin Production Faces Delay  

Motilal Oswal Report

Oil and Natural Gas Corporation Ltd.’s Q1 FY21 oil and gas sales were in line with estimates along with net crude oil price realization, thus resulting in in-line revenues.

However, lower other expenditure led to an Ebitda beat during the quarter. Offtake of crude oil by refineries from ONGC was not affected.

However, there was a reduction in gas production due to less off-take by some customers, which has now been restored to normal levels.

Production guidance in FY21 for oil stood at approximately 22.7 million metric tonne and for gas at approximately 24.9 billion cubic metres.

OPEC plus managed production cuts well (in line with demand), as various economies globally came out of the lockdowns.

Thus, crude oil prices hovered around approximately 45/barrel of oil U.S. dollar over the last two months.

Starting August 2020, OPEC plus also eased production cuts by 2 million barrels of oil per day (to 7.7 million barrels of oil per day).

Global demand is expected to reach approximately 97% of pre-Covid-19 levels in the next quarter (October-December 2020).

We have built in crude oil price forecast of approximately 45/bbl U.S. dollar for H2 FY21 and we expect prices to remain stable around current levels in the medium term.

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