MOSL: ONGC (Buy)-Lowering crude oil price estimates-Stock price correction provides an opportunity to buy
​ONGC: Lowering crude oil price estimates; Stock price correction provides an opportunity to buy
(ONGC IN, Mkt Cap USD34.4b, CMP INR158, TP INR195, 24% Upside, Buy)
- Crude oil prices decline despite production cut extension
- On 25 May 2017, OPEC and non-OPEC countries agreed to extend oil production cut until March 2018 in a bid to boost oil prices.
- Despite this, oil prices have declined due to rising production from Nigeria and Libya - the two OPEC members exempt from the cut.
- In May 2017, oil production in Libya increased by more than 240kbpd to 780kbpd and in Nigeria by 140kbpd to 1.52mbpd.
- The increased shale drilling and the revival in oil production from Libya/Nigeria are expected to lead to higher-than-expected slowdown in inventory draws in 2017. It presents a risk of inventory normalization not being achieved by the time the OPEC cut ends in March next year.
- We expect crude oil prices to hover near USD50/bbl until there is evidence of a decline in the US rig count, an increase in inventory draws or additional OPEC production cut. Thus, we reduce our crude oil price estimates to USD50/55/bbl for FY18/19 v/s USD55/60/bbl earlier.
Oil and Natural Gas is engaged in exploration, development and production of crude oil and natural gas. Co.'s business also includes niche areas like -processing of crude oil & natural gas; oil field services, transportation of the oil and natural gas, production of value added products like - LPG, Naphtha, Superior Kerosine Oil, ATF, C2-C3, etc., Refinery, Petrochemicals, Power, unconventional and alternate sources of energy. Co.'s five international locations as per oil & gas production are in Vietnam, Russia, Venezuela, Sudan, South Sudan, and Colombia. Co.'s five international locations as per oil & gas reserves are in Russia, Venezuela, Sudan, South Sudan, Myanmar and Vietnam.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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