Benzinga - Brokerages maintained a positive stance on Oil and Natural Gas (NS:ONGC) Corporation (ONGC) after the government announced higher premiums for new gas wells.
What Happened: ONGC said on Monday the Ministry of Petroleum and Natural Gas announced a 20% premium on the gas produced from new wells or interventions.
Previously, the domestic gas price (APM) was fixed at 10% of the Indian crude basket price. The new premiums apply to the oil fields of ONGC and Oil India (NS:OILI).
ONGC currently has two projects in its pipeline with the Daman Upside Development project and the integrated development of four contract areas under DSF-II, with a combined cost of around ₹13,800 crore.
Brokerage Views: Jefferies maintained a "buy" call and raised the target price to ₹420, increasing consolidated earnings per share estimates by 2% to 3% for FY26 and FY27, respectively.
According to the brokerage, ONGC’s valuation remains favourable with the stock trading at a discount to Nifty 50. The production ramp up of KG Basin and removal of upstream cess are upside triggers, the research firm added.
Citi maintained a "buy" call with a target price of ₹350. The notification would apply to 10% of ONGC's current gas production, which will rise to 20-25% of the production in 2-3 years, the research firm noted.
ONGC's blended APM price realisations could rise from $6.5 per metric million British thermal unit in FY24 to $7.5 per metric million British thermal unit in FY27.
The brokerage firm said that every $1 per metric million British thermal unit benefits consolidated earnings per share by 7%-8%.
Price Action: Shares of ONGC rose up 0.10% to ₹341.65 on Tuesday morning.
Read Next: Vodafone Idea (NS:VODA) Q1: Net Loss Contracts To ₹6,432 Cr, Revenue Flat