The Oil Exploration and Production business in India is critical to satisfying the country’s rising energy demands. In fiscal year 2023-24, crude oil output was roughly 27.17 million metric tons, while natural gas production was 12,135 MMSCM. The industry intends to dramatically increase exploration acreage by 2030, improving energy security and self-sufficiency.
With a market capitalization of Rs 93,326.62 crore, the shares of Oil India Limited were trading at Rs 573.75 per share, decreasing around 0.03 percent as compared to the previous closing price of Rs 573.90 apiece.
Brokerage Coverage:-
Motilal Oswal, one of the well-known brokerages in India, gave a ‘Buy’ call on the maharatna stock with a target price of Rs 720 apiece, indicating a potential upside of 25 percent from Friday’s price of Rs 573.90 per share.
Rational:-
As per brokerage, OINL plans to drill 78 wells in FY25 and 100 wells in both FY26 and FY27, which is expected to drive production volumes in the long run. The management has guided for a 6% p.a. growth in oil production over the next few years. With regard to gas production growth, the management guides to maintain the current trajectory of 10% p.a.
Moreover, OINL’s production growth has been historically limited by low demand in the North East. However, the IGGL start-up will boost demand, with gas consumption at NRL rising due to capacity expansion. Upcoming City Gas Distribution (CGD) networks may generate an additional 3-3.5 bcm in gas demand.
Financial Performance:-
In Q1 FY ’25, the company reported a 25.73% turnover increase to ₹5,840 crore, up from ₹4,645 crore in Q1 FY ’24. Crude oil production rose 6.22% to 0.871 MMT, while natural gas production increased by 9.8% to 0.818 BCM, reflecting solid operational performance.
However, profit after tax fell to ₹1,467 crore from ₹1,613 crore in Q1 FY ’24, primarily due to higher SAED and statutory levies. Despite a 10.46% rise in average crude oil price realization to USD 84.89 per barrel, earnings per share dropped to ₹9.02 from ₹9.92.
Management guidance:-
Management remains committed to achieving 4 million tonnes of oil and 5 BCM of gas production within 2-3 years, with plans to drill 78 wells this year and 100 next year. Current production is impacted by underperforming subsidiaries, but improvements are expected with the North East Gas Grid’s completion.
Expansion Plan:-
The NRL expansion project, with a total investment of ₹28,000 crore, has reached 65% physical progress and is expected to be completed by December 2025. Oil India has already invested around ₹19,000 crore in the project, underscoring its commitment to expanding refining capacity.
Market Conditions:-
Crude oil prices are currently around $80 per barrel, with upstream expenses expected to rise by 5% to 6% due to inflation. Including crude oil and natural gas under GST could lead to substantial savings through input tax credit benefits, improving cost efficiencies for companies.
Company snapshot:-
Oil India Limited is an integrated upstream exploration and production firm established in India that produces crude oil and natural gas. Crude Oil, Natural Gas, LPG, Pipeline Transportation, Renewable Energy, and Others are among the company’s business segments.
Written by:- Abhishek Singh
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