ONGC hits 52-week high after Fitch forecasts stable outlook

Shares of Oil and Natural Gas Corporation Limited (ONGC) traded over 5 percent higher to hit a 52-week high at Rs 183 on September 1 after Fitch Ratings gave a stamp of approval by affirming a BBB rating (stable outlook) to the PSU.

This rating shows that ONGC is considered to have a moderate level of creditworthiness. Additionally, Fitch has said that the future outlook for ONGC is stable.

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“We maintain ONGC’s Standalone Credit Profile (SCP) at ‘bbb+’, which reflects ONGC’s scale as the largest oil and gas (O&G) producer in India, its significant reserves and production, and its vertically integrated and geographically diversified business model, which are comparable with that of peers rated in the ‘A’ category by Fitch,” it said in a statement on August 31.

Key drivers

State Support: The rating agency believes that ONGC’s status, ownership and control by the government is ‘strong’ due to the state’s majority ownership and board appointments. “We expect the state to extend support to ONGC, if needed, due to its importance in India’s energy security as the largest national upstream company and third-largest refiner and marketer of petroleum products.”

Capex plans: Fitch expects ONGC’s consolidated capex to rise to rs 60,300 crore by FY27 from Rs 49,000 crore in FY23 as its core capex remains high and green energy investments increase.

Large production and reserves: ONGC is one of the largest global oil exploration and production companies. It produced 1.06mmboepd (Million Barrels of Oil Equivalent Per Day) of O&G in FY23, had proved reserves of around 5.9 billion barrels of oil equivalent (4.0 billion boe in India) and reserve life of around 15 years at FYE23. This, Fitch said,  compares with ‘A’ rated peers such as China National Offshore Oil Corporation’s (CNOOC ) production of 1.7 mmboepd.

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