This oil and gas stock surged 7.5% in trade today, find out why

Updated : February 23, 2021 01:53 PM IST

The share price of Oil and Natural Gas Corporation (ONGC) jumped 7.5 percent hitting a fresh 52-week high on the back of rising oil prices.

Crude has gained more than 20 percent this year triggered by COVID-19 vaccine breakthroughs.

As per analysts as Emkay Global Financial Services, for every $5/bbl increase in oil realisation, ONGC’s EPS would grow by Rs 3 per share.

The share price of Oil and Natural Gas Corporation (ONGC) jumped 7.5 percent hitting a fresh 52-week high on the back of rising oil prices. The sentiment was lifted after brokerage house Goldman Sachs said that it sees oil prices rising above $70 in the coming months.

The stock rose 7.5 percent to its 52-week high of Rs 114.35 per share on the BSE. So far in February, it has rallied 29 percent on rising crude, as compared to an 8.5 percent rise on the S&P BSE Sensex. Crude has gained over 20 percent this year triggered by COVID-19 vaccine breakthroughs.

"Oil prices will rally sooner and higher than previously thought as the global energy demand recovery outpaces the supply response from the OPEC+ alliance, shale and Iran," Goldman Sachs said.

As per analysts at Emkay Global Financial Services, for every $5/bbl increase in oil realisation, ONGC's EPS would grow by Rs 3 per share.

ONGC is pricing at a Brent crude price of $56/bbl versus a spot price of $62/bbl, suggesting scope for more gains even as futures indicate a decline in Brent price to $55/bbl by December 2022, noted brokerage house CLSA.

The company's standalone net profit in the October-December quarter stood at Rs 1,378 crore, which was 67.4 percent lower than Rs 4,226 crore net profit in the same quarter of the previous year.

The company realised $43.9 on every barrel of crude oil it produced and sold in the third quarter of the current fiscal, down from $58.24 a barrel it had realised in the same period a year back.

Emkay reiterated a 'Buy' rating and 'Overweight' stance on ONGC with a target price of Rs 130 per share, on the back of buoyant oil prices and potential overhaul in nominated block (APM) gas pricing.

"Brent prices have recovered to $65/bbl as demand recovery and strict output-cut compliance by OPEC+ has led to a supply deficit and inventory destocking. Further, large Covid-19-led stimulus announcements and recent extreme cold conditions in Texas affecting operations have also weighed in. With the arrival of summer driving season and personal mobility preference, higher gasoline demand should support prices ahead,” the brokerage firm said.

Meanwhile, CLSA upgraded the stock to an 'outperform' rating and raised its target price to Rs 105 apiece from Rs 90, indicating an 8 percent upside. The global brokerage had earlier given a 'sell' call on the downstream company's stock.

It also increased FY21 EPS due to stronger crude prices in Q4 and FY22-23 EPS by 10-18 percent as it expects the formula-based domestic gas price to settle higher after the recent rally in gas prices at global hubs.

This oil and gas stock surged 7.5% in trade today, find out why

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