Jefferies has reinterred a Buy rating on ONGC with a target price of Rs 375 per share. This implies 52% upside for the ONGC share price from current levels. According to Jefferies, the share price promises favourable returns on the back of reforms in gas and crude pricing. These support FY25-27 EPS growth of 14% on a compounded basis.

ONGC expects 10-12% compounded growth in production over FY26-30 on the back of the growth in Mumbai High. Additionally, Jefferies highlighted that, “BP’s success in Rumaila (40% production growth in similar geological reservoir) anchors ONGC’s outlook.”

ONGC is targeting 5-6% annual production growth over FY26-28 on the back of ramp up in crude and gas production from KG basin by the middle of this year- 2025. According to Jefferies, ONGC has contracted BP as Technical Service Provider and over10 years, “BP expects to increase crude oil/gas recovery by 44%/90% over ONGC’s assumed recovery estimates. This should result in 5% annual increase in crude and 8% annual increase in gas production from the field FY27 onwards if BP succeeds.”

According to estimates by Jefferies, “This could take ONGC’s production growth CAGR to 10%+ over FY27-30.”

Another reason Jefferies is upbeat about ONGC is because Mumbai High is geologically similar to Iraq’s largest oil field- Rumaila. After BP’s was inducted into a technical services contract there, production from the field rose 40% in 8 years. “Overall recovery in the field is likely to reach 50% (ONGC’s present assumption is 30% at Mumbai High). ONGC could enter into similar contracts based on the outcome at Mumbai High,” added the report from Jefferies.

Jefferies on ONGC: Gas portfolio profitability to rise on pricing reforms

ONGC expects 20% of gas production to be eligible for new well gas price (US$ 8.5/mmbtu) in FY26. This is expected to be 100% by 2030. Jefferies considers this to be a key positive as “Base nomination field gas will see $0.25/mmbtu annual increase FY26 onwards.”

Jefferies on ONGC: Crude business profitability

Jefferies report added that, “ONGC doesn’t expect the windfall tax on crude to come back below $100/bbl in order to attract global majors in exploration and provide fiscal stability as laid out in the recently passed Oilfields Amendments Bill. This should allow participation beyond the $75/bbl cap imposed earlier.”

Moreover, ONGC’s Ayana acquisition is “in line with its strategy of mature asset acquisition with land, grid access and PPAs in place. Current focus is on acquiring solar assets. The Company targets 14% Equity IRR in these projects,” added Jefferies outlining the key catalysts driving the positive outlook

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