EBITDA in line; continued production challenges seen ahead: ONGC reported in-line revenue with realisation at $75.4/bbl (+75% YoY, in line) and gas sales at 4.3 bcm (-4% YoY). EBITDA also stood in line at Rs 15,970 crore (+91% YoY, +21% QoQ). Management has guided for production of 21mmt/24.3bcm of oil/gas for FY23E and 24mmt/32bcm of oil/gas for FY24E, respectively. Our estimates were already conservative and thus remain unchanged. Further, we build modest production estimates at 22/23mmt for oil and at 21.7/25.8bcm for gas for FY23E/24E, respectively.
Commercial inventories of the US oil and liquids have declined to 1.18 bn bbl in December 21 from 1.34 bn bbl in December 20. Commercial oil and liquid inventories in the OECD have declined to 2.7 bn bbl in Dec ’21 from 3bn bbl in Dec ’20. Despite the modest assumptions, ONGC’s gas production is likely to clock 7% CAGR over FY21-24E, with efforts to arrest decline in oil production. We value the company at 10x FY24E Adj. EPS of 19.2 and add value of investments to arrive at our target price of225. Maintain Buy.
In-line revenue and EBITDA; announced second interim DPS of 1.75: The company reported in-line revenue at284.7b. Crude oil/gas sold was at 5.1mmt/4.3bcm, both in line with our estimates. VAP sold stood at 724 tmt (6% lower than our estimate, down 8% YoY and 7% QoQ). EBITDA stood at 159.7 billion (up 91% YoY and 21% QoQ). Reported PAT came in at87.6 billion (7% higher than our estimate, up 597% YoY, but down 52% QoQ).
Valuation and view – Reiterate BUY: For 9MFY22, ONGC’s revenue was up 62% YoY to 759 billion due to improvement in realisation to $70.2/bbl (v/s $37.8 in 9MFY21) with decline in gas production by 4% YoY to 16.3 bcm. The management guided for capex of300 billion for the enhanced production targets set by the company at 63 mmtoe (including JV) for FY25E and 60 mmtoe for FY24E as the major thrust remains on the east coast projects.
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