ONGC gets govt’s approval to invest ₹10,501 cr in OPaL; here’s how stock reacts

Oil and Natural Gas Corporation (ONGC), the country’s largest oil and gas explorer, has said in an exchange filing that it has received the government approval to invest more capital into ONGC Petro additions Limited (OPaL). OPaL is a joint venture between ONGC, Gas Authority of India (GAIL) and Gujarat State Petroleum Corporation Limited (GSPC).

The state-owned company in an exchange filing said the Ministry of Petroleum & Natural Gas on August 9 approved infusion of additional equity capital up to ₹10,501 crore in OPaL. With this additional investment, OPaL will become a subsidiary of ONGC with a 95.69% equity stake.

This investment includes additional equity capital of up to ₹10,501 crore, the conversion of Compulsorily Convertible Debentures (CCDs) worth ₹7,778 crore, and a balance payment of ₹86 crore for share warrants, totalling to ₹18,365 crore.   

"It is informed that the company has received a letter dated 09.08.2024 from Ministry of Petroleum & Natural Gas, Govt of India(GoI), conveying approval of the GoI for infusion of additional equity capital up to ₹10,501 crore in ONGC Petro additions Ltd (OPaL), conversion of back stopped Compulsorily Convertible Debentures (CCDs) amounting to ₹7,778 crore and balance payment of ₹86 crore with respect to share warrants, totalling to ₹18,365 crore," ONGC said in an exchange filing.

As per the release, the government has also provided roadmap for OPaL by permitting to allocate 50% of the annual gas production from new wells or well interventions in nomination fields of ONGC or up to 3.2 million metric standard cubic meters per day (MMSCMD) of domestic natural gas, whichever is lower. This will provide feedstock support to OPaL, at a price up to 20% above Administered Price Mechanism (APM) price. Under the APM, the price of natural gas per MMBTU is 10% of Indian crude basket price per barrel of oil.

Reacting to the news, shares of ONGC opened a tad higher at ₹332.65 against Friday’s closing price of ₹332.60 on the BSE. In the early trade, the PSU stock gained 0.9% to hit a high of ₹335.60, but it soon lost momentum and declined as 1.7% from day’s high level to ₹329.80.

At the time of reporting, ONGC shares were trading 0.2% lower at ₹331.95 apiece, while the market cpaitalisation stood at ₹4.17 lakh crore.  

ONGC shares touched its 52-week high of ₹344.60 on August 1, 2024, and a 52-week low of ₹172.80 on August 24, 2023. In the calendar year 2024, the stock surged 64.5%, while it rallied over 86% in the past 12 months. The oil and gas heavyweight has risen 28.5% in six months and 8% in a month.

Last week, ONGC released its June quarter earnings report, posting a decline of 42.8% in consolidated net profit at ₹10,236 crore as compared to ₹17,893 crore in the same period a year ago. Sequentially, the profit dropped 11% from ₹11,526.53 crore in the March quarter. This was attributed to higher-than-expected depreciation and dry well write-offs, and decline in other income sequentially.

The revenue from operations rose 1.7% to ₹1.66 lakh crore in Q1 FY25, compared to ₹1.63 lakh crore in the corresponding period of the previous year. On the operating front, earnings before interest, tax, depreciation and amortisation (EBITDA) climbed to ₹18,617.5 crore, down 4% YoY.

As per the earnings report, crude oil price realisation from ONGC’s nominated fields was $83.05 per barrel as compared to $76.36 per barrel in the year ago period.

During the quarter under review, total crude production was down by 1.4% to 5.23 million metric tonnes (mmt), while natural gas production dropped 4.1% to 5 billion cubic metres (bcm) as compared to the corresponding period of the last year.

ONGC, in its earnings report, says that it declared a total of 5 discoveries in FY’25 so far. Out of these, 2 are prospects (1 in onland, 1 in offshore) and 1 is a new pool (onland) discovery. 

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