ONGC rises 3% after Brent crude hits fresh 2.5-year high, HPCL deal valuation
Oil and Natural Gas Corporation shares rallied more than 3 percent following further spike in crude oil prices and after a media report indicated that ONGC may pay Rs 450 billion for HPCL stake. Crude oil prices extended rally further, hitting a fresh two-and-a-half year highs on Thursday amid tensions in Iran and due to ongoing OPEC-led production cuts. Positive global equity markets amid strong data from leading economies including the United States, Japan and Germany also boosted sentiment.
Brent crude futures - the international benchmark for oil prices - were at USD 68.13 a barrel, up 0.4 percent, after hitting a May-2015 high of USD 68.16 shortly before. Crude oil prices rallied more than 30 percent in last 6 months, which is always positive for oil exploration companies ONGC and Oil India (up 1.5 percent). Global brokerage firm Fat Prophets expects to Brent crude to trade in the range of USD 72-80 a barrel in 2018.
Moreover, a media report indicated that the government could get around Rs 450 billion from the proposed acquisition of Hindustan Petroleum Corporation (HPCL). The amount, which is 45 percent higher than the current market capitalisation of the government’s 51.1 percent stake in HPCL, includes HPCL's physical assets, marketing network and brand value, The Financial Express said. Analysts feel the HPCL deal is positive for ONGC.
Operational environment is strong, production of oil & gas is expected to rise by over 30 percent in next four years and EBITDA is likely to increase given higher realisations, analysts suggest.
At 14:39 hours IST, the stock price was quoting at Rs 199.50, up 3.13 percent on the BSE.