Author: Omkar Ashok Shitole
Introduction: ONGC was founded on 14 August 1956 by the Government of India. It is the largest government-owned-oil and gas explorer and producer in the country and produces around 70 percent of India’s domestic production of crude oil and around 84 percent of natural gas. (OVL) is the biggest Indian multinational, with 35 Oil & Gas assets in 15 countries. ONGC produces over 1.26 million barrels of oil equivalent per day, contributing around 71% of India’s domestic production.
Objective: The objective is to determine the value of ß (Beta) which is the coefficient of variable X, which denotes the relationship between dependent(ONGC) and independent variables(NIFTY 50).
Views And Review: ONGC’s reported EBITDA stood at INR194.5b (-25% YoY, +19% QoQ), 8% above our estimate, due to slightly higher gas realization and lower profit petroleum. As per earlier guidance, management expects oil production from KG-DWN98/2 to commence by Aug’23 in an optimistic scenario and by Oct’23 in a worst-case scenario. The peak oil production is likely to be ~40-45kbopd. Although the levy of windfall tax by the Centre with a fortnightly revision raised concerns on realizations of upstream companies, the government has adjusted windfall taxes in line with crude oil fluctuations. Our estimate suggests that the government is allowing a post-windfall realization of USD68-81/bbl. and we expect it to remain at ~USD70/bbl. from 2QFY24 onwards. The implementation of the Kirit Parikh Committee’s recommendations from Apr’23 has provided the much-needed respite to the company, as it had to sell gas below the cost of production for quite a long time. We build in gas price assumptions of USD6.7/mmBtu for FY24-FY25E. Additionally, ~6-8% of APM gas production comes from new wells that will attract 20% premium as per the new pricing policy.
Data Collection: There are two parts in the data collection:
1.Collecting the historical data of Nifty50 from the website of NSE India from 01/12/2022 to 30/11/2023. After collection of the entire data of the given time period only the data of Fridays are taken by sorting the whole data. According to the closing data of Nifty 50 of the time period, return values are collected using the formula of return.
- Collecting the historical data of equity (ONGC) from the website of NSE India from 01/12/2022 to 30/11/2023. After collection of the entire data of the given time period only the data of Fridays are taken by sorting the whole data. According to the closing data of Nifty 50 of the time period, return values are collected using the formula of return.
Data Analysis:
Correlation= -0.166
Nifty 50(x) = Independent Variable
ONGC(Y)= Dependent Variable
ONGC= -0.52164 -0.31447(Nifty 50)
-1.15947
N=49, Square of R= 0.027808, F= 1.344, P= 0.252
Interpretation: The above equation shows us the relationship between Nifty 50 and ONGC. ONGC is the dependent variable and Nifty 50 is the independent variable. The Negative sign shows there is a Negative relation and that if Nifty 50 rises, then ONGC falls and vice versa.
Conclusion: Beta is -0.521642839 is less than 1 it means ONGC is good for long term investment.
References: Buy ONGC; target of Rs 220: Motilal Oswal (moneycontrol.com)
ONGC-23-08-2023-moti.pdf (moneycontrol.com)
https://www.nseindia.com/reports-indices-historical-index-data.