Why Oil India Share Price is Rising

Indian share markets are on a roll. The BSE Sensex recently crossed the 73,000 mark and extended its previous gain while the Nifty regained the 22,000 level.

This has been on the back of strong global sentiment. Investor sentiment around the world is highly positive after strong US CPI (consumer inflation) data. This has created a rate-cut buzz among central banks across the world.

Riding this wave of exhuberance are many stocks. One of them is Oil India. The stock is up more that 12% in the last five days. This, despite the company posting weak results for the December 2023 quarter.

So, what's fuelling the rally?

Let's find out.

Strong Production Outlook

Shares of Oil India, rose over 12% in the last five days to hit their 52-week high after the company announced its results for the December 2023 quarter.

While the company posted a decline in in its net profit, it reported an increase in production. It also guided for an increase in production for the next few years.

During the quarter, crude production was up 6.1% YoY but was lower than the company target due to less than planned workover wells. Natural gas production was also up 2% YoY but was lower than the company target due to lower upliftment of gas and less than planned workover, drilling and old wells).

Going forward, the company has a production target of 3.35-3.4 MMT (million metric tonnes) in FY24, 3.8 MMT in FY25, and 4 MMT in FY26 for oil.

The natural gas target for FY24 is 3.2 bcm (billion cubic metres), 3.8-3.9 bcm for FY25 and 5 bcm for FY26 largely driven by customers.

Once the North-East Gas Grid is connected, there will be various opportunities for Oil India to sell gas outside. So, all the phases of gas grid are significant.

At the same time, Indradhanush Gas Grid Limited (IGGL), that is working in North-East is now almost ready, and has now proposed one more line in IGGL which will connect their field directly and connect to the IGGL mainline. With that line available, Oil India be able to increase production.

The company's Baghjan field is also being developed which has tremendous oil & gas potential.

The management is expecting to reach a production of 4 MMT by FY26 and has laid down a plan to increase drilling activity in the fields.

In FY24, it plans to double the number of wells and in FY25 it plans to go from 45 to 80 wells which will help the company to reach its target of 4MMT by FY26.

Improvement In Performance of Numaligarh Refinery (NRL)

Oil India reported a 3.6% YoY increase in revenue for the December 2023 quarter at Rs 96.1 bn. However, the company reported a 17.6% YoY decline in operating profit as crude oil prices rose.

Overall, it reported a marginal increase in net profit at Rs 26.1 bn as the performance of its subsidiary Numaligarh Refinery improved.

NRL's performance improved due to increase in capacity utilization to 114%. NRL has committed to investing a total of Rs 280 bn. Of this, the company has incurred Rs 150 bn in the year to date. It will invest the remaining by FY25.

There has been no major change in opex and maintenance capex is at Rs 1 bn.

NRL had a rights issue iin which OIL India participated and contributed 50% call money. Another Rs 1.1 bn will be given in FY25, covering the equity infusion for the refinery project.

How Oil India Share Price has Performed Recently

In the past month, shares of the company have gained 50%. The stock has gained 98% in the past six months and around 120% in the year gone by.

The stock touched its 52-week high of Rs 616.85 on 16 February 2024 and a 52-week low of Rs 238.25 on 27 February 2023.

At the current price, the company trades at a price to earnings multiple of 11.5x and price to book value multiple of 1.6x.

About Oil India

Oil India is an India-based integrated exploration and production company in the upstream sector, which is engaged in providing crude oil and natural gas.

The company's segments include crude oil, natural gas, LPG, pipeline transportation, renewable energy and others.

It owns and operates facilities and equipment to carry out seismic and geodetic work, two-dimensional (2D) and three-dimensional (3D) data acquisition, processing and analysis, drilling, oil and gas field development and production, liquefied petroleum gas (LPG) production, and pipeline transportation.

The company owns and operates an approximately 1,157 km long fully automated crude oil trunk pipeline between Naharkatia-Barauni.

For more details, see the Oil India company fact sheet and quarterly results.

For a sector overview, read our energy sector report.

You can compare Oil India with its peers:

Oil India vs ONGC

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