Oil and Natural Gas Corporation (ONGC), Oil India After the fall in crude oil prices overnight in the international market, the trend of falling stocks continued on Wednesday. As of 10.50 am, ONGC was down 5.5 per cent on the BSE while Oil India was down 8 per cent. Both the stocks have lost 21 and 31 per cent, respectively, in the last five days.
Why are oil stocks sinking?
The latest fall on Tuesday was driven by a sharp fall in Brent crude prices, as concerns of a possible global recession outweighed fears of a slowdown in fuel demand, supply disruptions. Oil prices, however, rose nearly 3 per cent on Wednesday before losing some of the gains as investors piled back on the market after a sharp fall in the previous session, fueled by supply concerns as well as a global slowdown. Came back with concern as well. Reuters reported.
On July 1, the government announced export taxes and banned the export of petrol, diesel and aviation turbine fuel (ATF) to secure domestic supplies of these products, at a time when exports are turning out to be highly profitable. . Similarly, in view of the sharp jump in oil prices, the government also imposed Special Additional Excise Duty (SAED) on crude oil production.
Nishit Master, Portfolio Manager, Axis Securities, said: “Oil stocks have weakened after the government imposed a special additional excise duty of Rs 23,250 per tonne on the sale of locally produced crude. On top of this, there was a significant fall in global crude oil prices yesterday on fears of recession in the US and Europe, which would impact the realization and profitability of both ONGC and Oil India which explains today’s fall.
Share Price History – Oil India, ONGC tank up to 33% in 1 week
Oil India closed at Rs 175.85, down 8 per cent on the BSE in intra-day trade today. Oil India has fallen 33 per cent in the past one week after the government imposed a special additional excise duty of Rs 23,250 per tonne on crude oil production on July 1. With the recent one-week decline, the stock has now corrected 43 per cent from its 52-week high of Rs 306 on June 9, 2022.
ONGC, which was trading 6 per cent lower at Rs 119.80 today intra-day, is down 21 per cent in the past one week. The stock fell 38 per cent from its 52-week high of Rs 194.60 on March 8, 2022. In comparison, the S&P BSE Sensex was up nearly 1 per cent in the past one week.
What do analysts say?
Analysts at Motilal Oswal Financial Services have cut ONGC and Oil India’s realizations at USD60/bbl for 2Q-3QFY23 and left it unchanged for 4QFY23. “We also believe that royalty and cess will be calculated on the actual value and benchmark. At USD100/bbl, both of these would equate to an additional reduction of USD12/bbl in recovery. Consequently, we have reduced our EPS of ONGC/Oil India by 29 per cent/25 per cent respectively for FY 2013 E,” the brokerage firm said.
Investors should be wary of any unexpected taxation on both ONGC and Oil India. As a result, we were valuing the shares at 3.5x and 5.9x standalone P/E respectively. Now that clarity has emerged on that front, we have cut receivables for companies keeping our multiples unchanged at 3.5x/5.9x respectively for ONGC/Oil India, the brokerage firm said.
Others in the petroleum block, especially refiners including Reliance Industries, Chennai Petroleum and Mangalore Refinery, were down up to 10 per cent. Oil Marketing Companies (OMCs) were trading with a gain of up to 3 per cent.
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