Oil India Beats ONGC as Stronger Production Growth Boosts Earnings
Oil India has outperformed state-owned ONGC in recent months, despite both companies facing pressure from weak market sentiment. Oil India's shares have risen by 13% over the past three months, while ONGC's have fallen by 2%. The difference is even more pronounced since the West Asia war began, with Oil India's shares down just 2% and ONGC's falling by 16%, a stark contrast to crude oil prices which are about 35% above pre-war levels.
The diverging trend between the two companies can be attributed to stronger production growth at Oil India, boosting earnings visibility. According to Kotak Institutional Equities, Oil India's total oil and gas sales volume is projected to grow by 13.8% in FY27 to 6.5 million tonnes of oil equivalent (mtoe), compared to a 2.4% rise for ONGC to 42 mtoe.
Oil India's production growth has been significant, with crude oil production growing by 18% in the first two months of Q2FY27, while ONGC's dropped by 3%. This follows a 12% growth for Oil India and a 3 fall for ONGC in Q1. However, it is worth noting that ONGC has a longer-term advantage due to its higher reserves.
Kotak estimates ONGC's 1P crude oil reserves at 13.6 times its FY26 production, compared with 8.3 times for Oil India. With sales volume growth rates projected to converge at 5% and 4.6%, respectively, in FY28, the advantage may narrow over time.
The government's push to revive offshore exploration through the Samudra Manthan scheme, which envisages ₹84,100 crore of support to oil exploration companies, is expected to benefit both companies in the long run.