tips to buy best shares ONGC stock

Oil & Natural Gas Corporation Ltd (ONGC) (updated - 08 Sept 2009)
The ONGC stock has underperformed the Sensex since the lows of March 2009, gaining 78 per cent to the Sensex’s 96 per cent. But with the government sparing the oil major the burden of cooking fuel subsidies, the stock should do well.

The government has decided not to pass on the losses incurred by oil marketing companies on account of higher cost of production and lower retail price of cooking fuels to ONGC. Instead, it will take on the burden and issue oil bonds to the oil retailers.

However, ONGC will continue to shoulder a part of the losses that downstream oil companies make because they sell auto fuels, such as diesel and petrol, at a retail price that is not enough to cover the cost of production.

The actual amounts would, of course, depend on the price of crude oil and the selling price at the pump. It’s possible that ONGC, together with GAIL, may bear as much as half of these under-recoveries, though in the past they have picked up a third of the bill. Analysts estimate the subsidy bill in the current year could be around Rs 4,500 crore.

With the price of gas expected to be raised, ONGC stands to gain; its average realisations in 2008-09 were $2.3 per million British thermal unit. The stock currently trades at Rs 1,188 and Kotak Securities has a price target of Rs 1,400, based on a price-earnings multiple of 10 times on estimated 2010-11 earnings.
source - BS

Disclaimer: Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person. Stock quotes are believed to be accurate and correctly dated, but does not warrant or guarantee their accuracy or date.
Our site takes no responsibility for any investment decisions based on recommendations provided on website.

Oil & Natural Gas Corporation Ltd (ONGC) (updated - 26 June 2009)
It’s now three quarters in a row that ONGC has disappointed the Street. The March 2009 quarter numbers have come in below consensus estimates thanks to lower than anticipated production levels and higher than expected costs. Net sales were down 11 per cent year-on-year at Rs 13,834 with sales volumes lower by about 8 per cent year-onyear. Besides, the net realised price for crude oil was lower at $43.4 per barrel compared with $49.7 per barrel in the March 2008 quarter. ONGC’s stand-alone profit after tax at Rs 2,200 crore is down 16 per cent year-on-year though there has been a one-time provisioning of Rs 880 crore for an arbitration dispute, pending the final decision.

Looking ahead, the company will benefit from the government’s reported move to increase the price of natural gas produced by ONGC from its nomination fields. The decision, analysts point out, could add around Rs 3 per share to ONGC’s consolidated earnings for 2009-10, currently estimated at Rs 100 for 2009-10. Also, industry watchers believe the government could consider freeing up gas pricing at some point.

Besides, should retail auto fuel prices be deregulated, ONGC may no longer need to compensate oil marketing firms for the shortfall they incur selling petrol and diesel though it may have to subsidise some losses on LPG and kerosene, prices of which are likely to be controlled. While these regulatory changes will result in a huge increase in profits for ONGC, the company has also announced several discoveries of oil which should ease concerns on the oil major’s being bale to replenish its reserves. Analysts point out that in 2008-09, the stand-alone company made 28 discoveries.

ONGC’s net realised crude price last year was $47.7 per barrel compared with nearly $53 in the previous year. With the average price of crude oil expected to be higher this year at around $60 per barrel and fair chance of an increase in gas prices, there is some upside to the stock. Since January, the ONGC stock has gained 54 per cent to the Sensex’s 46 per cent. Kotak Securities ascribes a fair value to the stock of Rs 1,100.
source - BS